"A
democracy cannot exist as a permanent form
of government. It can only exist until the
voters discover that they can vote themselves
largesse from the public treasury. From that
moment on, the majority always votes for the
candidates promising the most benefits from
the public treasury with the result that
a democracy always collapses over loose fiscal
policy, always followed by a dictatorship.
The average age of the world's greatest civilizations
has been 200 years." ~ Alexis de Tocqueville

"I
am perfectly willing to be killed in the name
of security, to have my organs sold to protect
freedom, for my leaders to sell narcotics
to finance our way of life, to have my fellow
patriots jailed without due process to keep
dangerous types away, to chant fascist incantations
at public events in respect, and to have the
votes rigged to assure the best candidates
win, if it means that the American citizens
are kept safe and secure and allowed to be
free and mobile within the fenced borders.
What incredibly mindless lunacy! This is fascism
growing ripe on the dead tree of liberty,
where capitalism has been trampled by corruption
and gutted by devotion to war." ~ the Jackass

"In
this environment, policy makers are finding
their authority, credibility, and firepower
being tested. In turn, they are finding it
tempting to pursue financial repression, suppressing
market prices that they do not like. But this
is bad policy, not least because it signals
diminished faith in the market economy itself.
Now that I am out of government, I can tell
you what I really believe. Central banks
are now so heavily influencing asset prices
that investors are unable to ascertain market
values. This influence is especially evident
with the Fed's purchase of government bonds,
which has made it impossible for investors
to use bond prices to learn anything about
markets." ~ Kevin Warsh (former Federal Reserve governor)

"So
here we are. Displeased with an incumbent's
policies, presented with a worthy alternative,
Americans took a pass and rested with the
status quo. The reasons for this do not speak
well for our national fabric." ~ Mark Davis (radio show host)

"When
Europe hits a bump in
the road, the Euro currency will tear apart
at the core." ~ Milton Friedman

EDITOR NOTE: Given the pivotal and extreme importance of this election and the
events on foreign soil related to embassies,
a Special Report entitled "Rise of
Fascism & Syndicate Exposure"
is included in the November package. It might
have belonged in a Crisis Coverage Report
in the past, which was discontinued in November
2010. Such controversial topics will not be
typically covered. But the fraud-ridden election
(as forecasted) and the deception related
to the Libyan events along with the purge
at the Pentagon present a story that must
be told. The developing roots of fascism with
a strong national socialism cannot be overlooked,
along with the important implications for
a risk toward global rejection of the USDollar
and repudiation of its USTreasury Bond debt.
The story will be told with no follow-up.
Do your own research to discover what is happening
with the United
States on its road to
fascism with potential interruption. Amazingly,
few care. Most people are in shock from the
economic plight and financial jam they find
themselves stuck in, while the other half
is busy with American idol, finding the next
party, playing video games (valuable for USMilitary
drone weapon operations), and awaiting the
next USGovt handout.

## INTRO MONETARY FRAGMENTS

◄$$$ THE US-STOCK MARKET DOES NOT APPROVE
OF THE OBAMA RE-ELECTION, A BITTER AFTER TASTE.
THREE FACTORS ARE AT WORK. THE USGOVT FISCAL
PROBLEMS ARE NOT TO BE RESOLVED. THE ENTITLEMENT
ECONOMY HAS BEEN ENDORSED, VERY COSTLY, SURE
TO CAUSE A NASTY GLOBAL RESPONSE. THE OBAMA-CARE
IS SEEN AS A BURDENSOME CURSE TO BUSINESSES.
THE RESULT WILL BE SEEN IN DEEPER ECONOMIC
RECESSION AND HIGHER UNEMPLOYMENT. $$$

Ryan Puplava summarized well the current confusion, predicament, and puzzle
wrapped in the US stock market. He wrote,
"Over the past few weeks, I have not
seen more disagreement among market technicians
I follow, along with my own work, until now.
Last September, I made a laundry list of items
I wanted to see that would indicate to me
that the simple correction down to 1430 would
continue much further. Many of the conditions
for an intermediate top were confirmed when
the market opened for trading following the
election results. Breadth has rolled over,
moving averages have been pierced, and buyers
have not only left the building. But they
are buying a ticket at the airport, with destination:
CASH, until the Fiscal Cliff gets (un)resolved."
Puplava goes on to describe a mass of
contradictions and confusing signals riddled
among the technicals. Lack of confirmation
is evident. Breakdowns in moving averages
are evident. Defensive measures are evident.
Momentum has failed. A resolution cometh soon,
but it will probable be ugly. See the Financial
Sense article (CLICK HERE).
A message to Ryan. Stop trying to make too
much sense out of a very controlled manipulative
and propped stock market. Remove the USGovt
supports and the DJIA index would be 40% to
50% lower, confirming the recession that has
endured since 2009 without respite or halt.

◄$$$ BILL GROSS OF PIMCO REPORTS ON THE TERMINAL PHASE. HE REBUTTS THE
NOTION OF USFED LOW RATES BEING A STIMULUS.
HE ARGUES THE CHEAP MONEY IS BEING INVESTED,
AS IN SPECULATED. HIGHER COSTS ARE THE RESULT,
A CONSISTENT JACKASS POINT. HE SEES A PERSISTENT
ECONOMIC MORASS WITH LOWER CAPITAL INVESTMENT,
AND THUS LOWER INCOMES AND FEWER JOBS. $$$

Bill Gross of PIMCO is a realist who speaks against the grain. His words are
important because of his bond expertise, and
due to a close alliance with the USDept Treasury.
He argues that cheap money offered through
zero-based interest rates and Quantitative
Easing is often spent or invested. He overlooked
curiously a powerful phenomenon of fund managers
and wealthy individuals hedging against the
USDollar debasement in aggravated volume,
with commodity vehicles. That has lifted the
cost structure, a steady Jackass theme. It
is largely not going into new capital investment,
a major consistent Jackass theme. The arrival
of an industrial China precludes the normal
kicking into gear the USEconomy from temporary
low rates. They are permanent, and ineffective,
but stuck since the USGovt cannot afford higher
borrowing costs. Besides, higher rates would
torpedo the entire US banking and derivative
structures. Gross makes the point that the
spending made easy merely extends the Recession,
if not Depression, but in a manner limited
in time. He warns the game is ending. He notes
the absence of any significant productive
investment, not enough to return to normalcy.
Not enough to bring the jobless rate under
6%. Not enough to return prosperity to the
middle class.

Gross wrote, "In the past three years of Quantitative Easing and financial
repression, can we see a noticeable effect
on investment as opposed to consumption? Is
the Bernanke model working or is the $9975
being spent on consumption? At first blush,
an observer might vote for the Bernanke model.
After all, the stock market has doubled in
three plus years, risk spreads are at historical
lows, and housing prices are moving up, 10%
higher in Southern California alone. Yet the real economy itself seems no different,
still in New Normal gear.
Surely by now, if the Bernanke model was as
advertised, we would be seeing a pickup in
investment as a percentage of GDP and a willingness
to start saving 'seed corn' as opposed to
eating 'caramel corn.' [It is not happening!!]"

Gross points to work by a new colleague on the PIMCO staff, who replaces Paul
McCulley (retired). Focus on net national
savings, which is the amount of government,
household, and corporate savings that remains
after the existing investment stock is depreciated.
Savings has dwindled down to zero after
reaching 7% in year 2000. It is actually
negative since 2010, which just happens to
be when the Quantitative Easing desperation
set in by the USFed. Its 0% rate with unlimited
bond monetization has been acting like a wet
blanket atop a wrecking ball, since not temporary.
It is a fixture in the monetary policy, precisely
as the Jackass warned in summer 2009. The
USFed talked of an Exit Strategy, and my words
were contradictory and loudly stated, correctly
so. ZIRP & QE are permanent, as forecasted.

Gross points out that no evidence exists that investment
incentive is being realized by the QE largesse
by the USFed central bank monetary policy. He admits the money created and freed up has elevated asset prices, but not
any notable rise in corporate investment in
production capacity. His focus is more directed
at stock prices (asset) than hedging vehicles
(crude oil, gold, silver, other metals). Thus
no new jobs, only higher costs, the Jackass
point harped upon for two full years. Capital
destruction is rampant within the USEconomy.
This continues to be an enormous blind spot
by American economists, European too. They
regard the ZIRP and QE as double doses of
stimulus, when they are in fact double doses
of capital poison. Gross confirms my consistent
point of capital destruction, offering the
evidence, but not repeating my precise point.
He chooses the words financial repression,
in describing a gateway to the terminal phase.
See the PIMCO article (CLICK HERE).

◄$$$ A NEW OPPORTUNITY SUDDENLY ARISES, AS TREASURY
SECRETARY GEITHNER WILL NOT RETURN FOR THE
SECOND ADMINISTRATION. BIG RISKS LIE AHEAD
FOR THE SUCCESSION, AS MULTI-$TRILLION CRIME
MUST BE COVERED UP ON A CONSTANT CONTINUAL
VIGILANT BASIS. SYNDICATE PROTECTION IS HIGHEST
PRIORITY, FAR ABOVE ENACTING A SOLUTION. BIG
RISKS ARE RISING FOR A USTBOND PROBLEM CENTERED
ON DERIVATIVE SUPPORTS. SHEILA BAIR IS A VERY
LIKELY CANDIDATE. GARY GENSLER IS ALSO A FRONT
RUNNER, BUT HIS GOLDMAN SACHS TIES COULD BE
A LIABILITY. WATCH FOR A DARK HORSE INSIDER
WITH HIDDEN GOLDMAN SACHS TIES. $$$

The next avidly watched focused financial signal flare event will be the selection
of a new Treasury Secretary for the Obama
II Admin. If the selection emerges from the
same old same old Wall Street and Goldman
Sachs hideouts, then trouble brews. Given
the deep disdain maintained by Wall Street
toward Obama, the decision will be made more
interesting with possible intrigue. Obama
angered Wall Street firms with attempts to
reach out for guidance following the Lehman
disaster and financial regulatory discussions.
But the executives almost without exception
regard the Obama actions as stabbing them
in the back, playing to the anti-banker public
sentiment, and grandstanding in an amateurish
manner. The see a loud pedagogue. The Obama
Admin has been forceful in attempting to put
the Financial Regulatory Bill provisions in
force, which the firms believe is putting
the screws to them.

Many expect the top priority of incoming Treasury Secy to be tackling the fiscal
problems and debt limit issues. That is obvious.
Mack is correct, that with all the coordinated
bond monetization by foreign central banks,
with all the anti-USDollar activity rallying
around China
on trade settlement alternatives, the next
Treasury Secy will be challenged to know the
global stage. With all the brutal sovereign
bond crush in Europe, which could extend soon
to France,
contrasted against powerful interest rate
derivative applications to keep the artificially
low USTBond yields, the next Treasury Secy
will be presiding over a wrecking field. The
likelihood of a bond market breakdown and
derivative buttress avalanche is high during
the next four years. Furthermore, the Jackass
expects the selection process to be quietly
bound within the Wall Street camp, within
touching distance of Goldman Sachs but not
showing GS on the resume. That might rule
out the corrupt insider Gensler.

In 2008, much banter was heard about requiring a Treasury Secy with experience
of how the system works, so that on the job
training could be avoided. That was nothing
more than coded admission that criminal enterprised
had to be protected. The top priority for
the incoming Trez Secy will be to keep concealed
the multi-$trillion bond fraud and counterfeit
that centers on mortgage bonds sold by Wall
Street firms, in addition to the $2.2 trillion
in counterfeited USTBonds sold by JPMorgan.
The counterfeit records were in World Trade
Center Building 7 that was felled without
aircraft impact. Given the public hatred brewing
against JPMorgan, the slow development in
the imploding Interest Rate Swap contract
flying buttresses, and the mountain of investor
lawsuits for mortgage fraud, the House of
Morgan will be toppling or teetering. The
next Treasury Secy must keep the defensive
walls in place with dexterity, aplomb, and
cool temperament, to defend against assaults
like a USGovt debt downgrade, the next being
with deeper consequence. Lastly, the new
secretary must be in a position to tackle
those who wish to extend the LIBOR bank scandal
to two other highly charged third rail areas.
The Allocated Gold Account scandal is pushing
to the surface, what with Germany
demanding its official gold to be fully accounted.
The vast narco money laundering is also lurking
around the corner, since the USGovt has championed
foolishly this issue against big global banks
for their Iranian transactions. If vengeance
comes, the New
York money center money laundering issue could
blow up in the USGovt face. It has become
engrained within the high level banking system,
the US banks being by far the greatest criminal offenders.
In fact, without narco money laundering, led
by Bank of America and JPMorgan, the US
banking system would have collapsed by 2009.

Sheila Bair is often mentioned, whose most recent post has been Chair of the
FDIC. In the past positions she served as
Senior VP of Govt Relations of the New York
Stock Exchange, and the Asst Secretary for
Financial Institutions. However, Bair might
not evoke confident cover-up protection for
the entrenched criminal Wall Street camp.
Erskine Bowles is mentioned, Co-Chair of the
National Commission on Fiscal Responsibility
in the Obama Admin. He is touted by former
Morgan Stanley head John Mack, for his global
perspective, which Mack believes is much more
essential nowadays. Jack Lew is mentioned,
currently working as White House Chief of
Staff. He has held posts as the Director of
Office Mgmt & Budget, the Deputy Secretary
of State, but more importantly a Member of
the Council on Foreign Relations. Larry Fink
is mentioned, currently Chairman & CEO
of Blackrock. He has held posts as First Boston
Bank Managing Director, but more importantly
a Member of the Council on Foreign Relations.
An outside dark horse is Roger Altman, currently
Chairman of Evercore Partners, the former
General Partner of Lehman Brothers, and former
Vice-Chairman of Blackstone. He served as
Asst Treasury Secretary in the Carter Admin.

A front runner for the job is regrettably Gary Gensler, the walking puke from
Goldman Sachs currently serving as Commodity
Futures Trading Commissioner. He has done
well to appear to be fighting against the
big banks, like with the investigations into
the large Silver short position, and into
the outsized short positions that are not
economically justified. Given the criticism
that GSax has taken over the sweet deal within
AIG redemption of CDSwaps, and has been smeared
in Europe over the Greek
Govt debt concealment, another GSax obvious
lieutenant might not happen this time around.
However, my full expectation is that the
next Treasury Secy will be somebody with hidden
deep ties to Wall Street, who has shaken a
lot of GSax hands, who knows how to wink and
nod to South Manhattan.

Some talk has circulated that Chairman Bernanke at the USFed is not too keen
on continuing beyond his tenured end in 2014.
Janet Yellen is the front runner by default
to be tapped as USFed chair, more likely than
for the Treasury Secy. That debate is for
another day, since not an immediate concern.
My belief is that she is more honest than
her resume indicates, and therefore not qualified
for further consideration. The USFed head
post is far more elevated in rank and importance,
while the Treasury post is well suited for
a veteran club member or a lackey to follow
orders. The USFed post is designed for managing
the helm, but the Treasury is for executing
in the field like with the huge Exchange Stabilization
Fund and the Fannie Mae criminal slush fund
clearing house function. The Jackass expectation
is that the Treasury post will go to an older
veteran with a scummy background that appears
clean, who shows less noticeably ties to inner
Wall Street connections. It will not be a
guy who seems like a jolly uncle at the dinner
table that one can trust. Too much is at stake,
with a potential USTBond asset bubble accident
centered on falling derivative support structural
beams. Too much is at stake, with possible
criminal allegations coming against the banker
elite in the next couple years, who are in
charge of the USGovt finance ministry.

◄$$$ THE BANK OF ENGLAND FINDS THE GOLD STANDARD
LEADS TO LESS CRISIS THAN THE FIAT REGIME.
THE INTERNAL REPORTS URINATES ON THE BANKER
FRONT DOOR OF POWER. THE CRISIS OF INSOLVENCY
AND ECONOMIC RUIN WILL OVERWHELM THE BANKER
ELITE. A RETURN TO THE GOLD STANDARD IS LOGICAL,
BUT THE CRIMINALITY OF THE BANK CARTEL MUST
BE ADDRESSED. IT IS BEING EXPOSED, BUT WITH
AN EXCRUCIATING SLOW PACE. $$$

Praise is in order for the Bank of England, as it released a research document
that assaults the fiat money currency system
as a failure in three important objectives.
It has not provided for 1) internal balance,
2) allocative efficiency, or 3) financial
stability. The international financial and
monetary system (IFMS) has functioned under
a number of different regimes over the past
150 years. Each has a different report card
on performance, the worst being fiat money
on all three objectives. The fiat regime is
the favorite for the Syndicate, since crime
flourishes unpunished. Its greatest failure
is the systemic inability to maintain financial
stability and minimize the incidence of disruptive
sudden changes in global capital flows. The
chart shows five-year moving averages. Notice
how successful the Gold Standard years were
until 1910, then how boring and stable and
perfect they were from 1950 to 1973. The bankers
could not tolerate rules that brought prosperity
to the masses.

Do not look to the academic economist sphere for guidance, explanation, or enlightenment.
Nor should one expect elucidation or solutions
from compromised policymakers. They cannot
identify the underlying problems in the global
economy which have allowed excessive imbalances
to build. They cannot explain the impeded
corrective functions to counteract these imbalances
in orderly adjustments. The current contrived
system has resulted in dramatically more incidents
of banking and currency crises than under
a Gold Standard. That is the research conclusion
at the Bank of England. It does not touch
on deep bank criminality, the added spice
of arsenic in every soup bowl imaginable.

The IMFS is the set of rules, practices, and institutions that facilitate international
trade, while managing the allocation of investment
capital across nations. An effectively functioning
system should promote economic growth by channeling
resources in an efficient manner across nations
of the world. It should create fair and efficient
conditions for international financial markets
to operate in a smooth and sustainable fashion.
It should discourage the build-up of balance
of payments problems. It should prevent enormous
imbalances and trade deficits, a direct sign
of much like a 330 lb (150 kg) man. It should
facilitate access to funds in the face of
disruptive shocks. While there are some complementarities
between prudent objectives, there may also
be conflicts. These functions suggest that
the ideal system should satisfy the following
objectives:

A) Internal balance: the IMFS should enable countries to use macro-economic
policies to achieve non-inflationary growth.

B) Allocative efficiency: the IMFS should facilitate the efficient allocation
of capital by allowing flows to respond to
relative price signals.

C) Financial stability: the IMFS should help to minimize the risks to financial
stability.

The various IMFS regimes have involved different combinations of international
and national frameworks. Members of the Gold
Standard, for example, fixed their currencies
to gold, allowed capital to flow freely across
borders, and tended not to use monetary policy
actively. So they gave ground on the internal
balance objective in order to achieve allocative
efficiency and financial stability. The Bretton
Woods System (BWS) featured fixed but adjustable
nominal exchange rates, constrained monetary
policy independence, and enforced capital
controls. It effectively sacrificed the allocative
efficiency objective in order to allow greater
control over internal balance and financial
stability. The contrast to the present horrendous
failure of the system is stark. In the
current system, almost no binding international
rules exist, which permits rampant corruption.
Instead, a hybrid arrangement prevails in
which countries are free to choose whether
to fix or float their exchange rate and whether
to impose capital controls or not. The
current IMFS system affords countries the
freedom to pursue policies to suit their domestic
objectives, this flexibility opening the door
to widespread corruption and government protection
of criminal organizations. It has created
insurmountable problems. The words of Tyler
Durden describes a prozac patient working
closely with a pharmacist. He wrote, "Fiat
suppresses reality but the cumulative reality
will always find a way to escape, in crisis."
See the Zero Hedge article (CLICK HERE).

◄$$$ US-STUDENT LOAN DEBT HAS REACHED $500 BILLION. NEW DEFAULT RULES
WILL APPLY, WITH THE USGOVT ASSUMING THE LOSS
AFTER 20 YEARS IF NOT PROPERLY REPAID. THE
LENDER OF LAST RESORT FOR FUTURE OPPORTUNITY
IS THE USGOVT, AT A TIME WHEN THE USECONOMY
IS NOT PRODUCING THE NECESSARY NEW JOBS. SMELLS
LIKE ANOTHER SUBPRIME MESS BEING GROWN, SURE
TO AMPLIFY USGOVT DEFICITS ON THE ROAD TO
DEBT DEFAULT. $$$

Direct government student loans have exceeded half a $trillion, the new subprime
lending project. Higher education costs are
out of control. Another sharp increase in
government financed student loans has come
forward. The figure does not include the student
loans guaranteed by the USGovt, but not funded
by loans. Consumers no longer can tap their
home ATM source for cash. As a result, consumer
credit is on the fast rise again. Consumer
credit rose by $11.4 billion in September,
compared to the very large revised gain of
$18.4 billion in August. Student loans drive
the total higher. The non-revolving component,
home to the student loan category, rose $14.3
billion in the month on top of a $14.1 billion
gain in August. Revolving credit actually
declined to $2.9 billion for the third decrease
in four months. It is where credit card debt
is tracked.

In an attempt to ease the problem of rapidly rising student indebtedness, the
USDept Education made it easier to repay student
loans. In early November, the department issued
the final regulations for the new generous
student loan repayment program. The president
led the program, known as 'Pay as You Earn'
which adds to the socialist burden the nation
cannot afford. The new program allows some
graduates to peg their federal loan payments
to 10% of discretionary income, followed by
complete forgiveness of remaining balances
after 20 years. So this Extend & Pretend
cousin will have a firm reward. The policy
effectively makes the taxpayer responsible
for funding a larger portion of higher education
costs. The standard policy at universities
with financial aid has been to help the lower
income gifted students, but at the expense
of middle class families who have seen an
escalation in costs over two decades. The
only way many middle class families can manage
the high tuition payments is by tapping student
loans in growing amounts. Unfortunately colleges
often raise tuition simply because they can
or because their competitors are doing it.
All their costs are rising. See the Sober
Look article (CLICK HERE).

##
FISCAL CRASH FOR USGOVT

◄$$$ THE USTREASURY BOND MARKET COMPETES WITH HIGH GRADE CORPORATE DEBT,
WHICH LOOKS FAR SAFER AND EXHIBITS MORE INTEGRITY.
THEIR BALANCE SHEETS ARE STRONGER. THE BOND
SHARE FOR SOVEREIGN DEBT IN THE OVERALL BOND
MARKET HAS ALMOST BEEN CUT IN HALF IN THE
LAST THREE YEARS. THE DEFAULT INSURANCE FOR
THE USTREASURYS IS HIGHER THAN EIGHT DOW JONES
INDUSTRIAL INDEX COMPANIES. $$$

A consequence has come to USGovt Bonds, which pay piddling paltry puny yields.
The demand has moved to corporate bonds, whose
financial condition is far better. The bond
monetization ruinous practice does that. The
USTBond demand has been soaked up by the broken
USFed, which dutifully buys over 80% of all
issued and recycled USGovt debt. The soaring
diverted demand has enabled companies of all
sizes to raise $1.2 trillion from issuing
debt in 2012, already the busiest year on
record, according to data provider Dealogic.
US
corporations sit on $1.73 trillion of cash,
not to come back to the US anytime soon, a continuous deceptive outlook
expressed by officials. The cash is discouraged
from coming home to the United
States by the Weimar
bond production, ongoing burdensome federal
taxes and regulations, within the threat of
systemic ruin. The US
corporations borrow at the lowest rates in
history, and are arguably in the best shape
ever, except that their customer base is insolvent
and facing extinction with the cloud of martial
law looming.

Some history was recently made. Bonds from Exxon coming due in 13 months
were quoted last week at one basis point (=0.01%)
less than the comparable USTreasury Bill,
according to Benchmark Solutions. Bonds of
Johnson & Johnson due in May 2014 also
recently traded at one basis point below USTreasurys.
Both are rated triple-A by Standard &
Poors. According to Credit Suisse, the
share of worldwide government debt rated triple-A
has fallen to 39% of the total from 58% in
early 2010. The sovereign debt merchants
are losing ground, due to a faulty monetary
foundation, reckless management and fealty
to the banker elite, and debt saturation.
Credit strategy analyst Fer Koch at Credit
Suisse said, "Corporate bonds are
definitely the new safe havens in this world."
Big ooops for government finance ministers.

Another indication is the Credit Default Swap cost, which relates to insurance
against bond default. The CDSwap cost for
a 5-year USTNote is still below the average
Dow Jones Industrial Index stock. However,
several DJIA companies are perceived safer
by the credit markets than USGovt debt, which
grows uncontrollably and is supported by the
USFed QE bond program and the leveraged Interest
Rate Swap derivative machinery. The current
CDS for a 5-year USTreasury stands at 37.35
basis points, which is higher than eight DJIA
flagship stocks. Those corporations range
from Merck at a meager 15.50 basis points,
to Exxon Mobil, Chevron, McDonalds, Disney,
3M, Johnson & Johnson, and WalMart at
34.43 basis points. See the Financial Sense
article (CLICK HERE).
What comes next is the sound of the crash
impact after falling off the fiscal cliff
in 2008 long ago, whose sound finally is heard
after a long delay. The speed of sound has
been suppressed by the gods of Wall Street.
It will be heard very soon.

◄$$$ THE OBAMA ADMIN HAS BEGUN A PUSH TO CONFISCATE IRA & 401K PERSONAL
PENSION FUNDS. AS WARNED BY THE JACKASS FOR
THREE FULL YEARS, PRIVATE PENSION FUNDS WILL
BE CONVERTED TO USTBONDS. THE PROGRAM WILL
BE INSTALLED WITHIN ALL EMPLOYERS, ALONGSIDE
INCOME TAX AND SOCIAL SECURITY (FICA) TAXES.
THE MANDATORY PROGRAM WILL BE UNAVOIDABLE.
OWNERSHIP OF TOXIC USTBONDS WILL BECOME A
NATIONAL PRACTICE WITH PUNY RETURNS, AND RISK
OF LOSS WHEN THE USGOVT DEBT DEFAULT OCCURS.
$$$

Three years ago, the Jackass had several conversations with family members and
key friends, urging them to close their IRA
and 401k fund accounts, pay the tax, invest
in Gold & Silver, vault in GoldMoney outside
the United
States. My argument
was that with a Gold price at $800 and a Silver
price at $12, the punitive tax hit would be
overcome in 12 to 18 months, since both precious
metals would double in price. My advice
was ignored by everyone contacted, causing
some hard feelings. The advice turned out
to be worthwhile and on the mark. It is late
in the game to convert, take the tax hit,
and proceed. But doing so is still a good
idea, since the Gold & Silver price will
double and then double again in the future.
Removing large sums of money from the US banking system might be much more difficult
nowadays.

Private retirement accounts are soon to be forced into long-term USTreasury
Bonds, including both personally and professional
managed funds. The Obama Admin is reportedly
quickly moving on plans to nationalize private
401k and IRA retirement accounts, replacing
them with government sponsored annuities.
According to informed sources tuned into developments,
a bill is before the USCongress would require
all businesses to automatically enroll their
employees in a new USGovt-sponsored IRA plan.
Every worker paycheck would automatically
see deductions, with deposits directed into
this account. Passage of the bill would permit
the USGovt to confiscate all organized private
retirement accounts. Curiously, representatives
of the AFL-CIO labor unions are advocating
more federal regulation over private retirement
accounts and the creation of USGovt-sponsored
annuities to replace the 401k system.

The political spin actually being stated is that the
401k plans and IRAs are unfair to poor people. Deputy Treasury Secretary Mark Iwry,
the driving force championing the program,
is a habitual critic of 401k plans because
of the favored treatment given the rich. He
probably believes bank CDs also give favored
treatment to the rich, due to the FDIC deposit
insurance. The Jackass point has been steadily
made every several months, that the USGovt
will use the tax deferral feature of private
pension funds, and the FDIC deposit insurance
as leverage to confiscate pension funds and
bank certificates of deposit. When the USGovt
debt default occurs, these funds will be at
great risk of loss, perhaps total. Consider
it national re-hypothecation, a ticket to
serfdom in the greatest country on earth,
the beacon of freedom, and envy of liberty
the world over. Count me out, as of January
2007, since the entire nightmare was seen
in advance.

The program would be administered by the PBGC, the federal
Pension Benefit Guarantee Corporation. This
is the fund that guarantees pensions for corporations
that file bankruptcy. How appropriate, since the nation
(households, banks) is bankrupt. Realize that
this program is a response to the horrendous
corner the USGovt finds itself lodged in.
The chronic $1.3 to $1.5 trillion federal
deficit is not coming down, actually no effort
to bring it down. The gap at this time is
filled by the USFed in bond monetization,
the printing of new money for the purpose
of buying the new debt securities that nobody
wants. The stalemate in the USCongress might
find common ground in such pension fund attachments
(not confiscations). The USGovt is pursuing
a radical path to fund the $1.3 trillion annual
deficit, using American citizen retirement
funds. It is a pool of wealth, much like the
money market funds, seen as vulnerable, just
lying out there with no watchdog. It is not
known whether the sponsored annuity based
in USTBonds can be liquidated upon the death
of the client owner. The battle might be ugly
to win approval. See the Silver Doctor article
(CLICK HERE).
Investing in Gold & Silver seems 100 times
better, especially if done a few years ago.

◄$$$ DEAD AHEAD, THE USGOVT WILL CRASH AFTER FALLING OFF THE FISCAL CLIFF.
THE CLIFF IS NOT BEING APPROACHED. RATHER,
THE NATION WENT OVER THE CLIFF ECONOMICALLY
AND FINANCIALLY FROM 2008 TO 2011, WHEN THE
FISCAL DEFICITS ROSE ABOVE $1.3 TRILLION EACH
YEAR AND REMAINED ABOVE THE LOFTY LEVEL. NO
ATTEMPT IS BEING MADE TO AVOID THE FISCAL
DISASTER, MARKED BY FIVE STRAIGHT YEARS OF
13-DIGIT DEFICITS (OVER $1 TRILLION). ALL
PLAYERS SEEM TO BE CONFORMING TO THE PARTY
BATTLE
LINES AND THE RULE OF PARTY HARDY. THE USGOVT
DEBT LIMIT IS THE NEXT CRITICAL BATTLE, NOT THE BUDGET, WHICH WILL SEE HAGGLING
AND LITTLE PROGRESS. $$$

The term Fiscal Cliff is laughable in usage. Since 2008, the USGovt debt has
spiraled above $1.3 trillion in annual new
debt burden, and remained above that level.
Therefore, the United States has gone over
the fiscal cliff, hardly approaching it. If
the nation were faced with decisions to avoid
a $1 trillion debt, then it would be approaching
such a cliff. For over three years, the outsized
debt has formed the impact crater for national
finances. The US
as a nation is crashing with a horrific impact
on the debt made chronic. The mandatory spending
cuts in January do not describe a cliff, but
rather an economic impact crater. The entire
imagery is ludicrous and misleading. Furthermore,
the US
has lost its motive or capacity to pursue
solutions. So a solution will be imposed on
it after global USdollar rejection. The focus
of global initiatives that isolate the US
will be on trade settlement and related banking
functions.

The USGovt just ran a $120 billion deficit in October,
a hefty 22% higher than the previous month. Nothing has changed the deadly trajectory
on the path down after falling off the fiscal
cliff. This marks the fifth consecutive year
of an annual deficit exceeding $1.0 trillion,
a correct Jackass forecast made in late 2008.
Watch the ship of fools wrestle with the budget
and national debt limit in the coming weeks.
The president achieved a highly tainted vote
mandate in re-election, but has shown no leadership
on the issue. He barely attends meetings,
but he sure looked presidential in reviewing
the storm damage. With a handy earpiece to
direct his comments, he sure looked in control
during the debate. His supporters are oblivious
to debt issues, concerned more about the glitz
of the office and continued welfare state
handouts. The Obama Admin has presided over
four straight $1 trillion deficits, the first
in history, which he successfully blamed on
the Bush II Admin to an inept population.
He has had ample opportunity to stimulate
the USEconomy, but his main attempt was a
state bandaid botch to fill their budget shortfalls.
It had no simulus in the package. His GM rescue
and clunker car credit was equally pathetic.
Global confidence will hit new lows in the
US
stewardship, both banking and politics.

The USGovt business sheet has major problems. The tax revenue increased to $184.3
billion, up 13% than the same October month
last year. Still the spending rose to $304.3
billion, a monster 16.4% rise. The budgeted
fiscal year begins in October, where the norm
has been to load a bunch of costs from late
in the last fiscal year. The USGovt (so we
are told) ran a $1.1 trillion annual budget
deficit in fiscal year that ended in September.
The final figure avoids special war costs
and other inconveniences. The chronic $trillion
deficit is lodged firmly. The debate remains
of spending cuts, entitlement protection,
tax hikes, wealthy tax break defense, with
the tacit understanding never to discuss defense
(aggressive war) costs. A package of tax increases
and spending cuts is ready to take effect
in January unless the White House and Congress
reach a budget deal by then. They call it
the fiscal cliff, but very improperly. Over
the past three years, tax revenue has fallen
below 16% of the total economy as measured
by the Gross Domestic Product. This data
makes an ugly lie of the talk of recovery,
since the decline confirms a recession, precisely
as the Jackass has claimed. Spending has exceeded
22% of GDP. The USGovt has been forced to
borrow to finance the 6% gap, which has pushed
the cumulative federal debt to $16.2 trillion.
The government is expected to hit its borrowing
limit of $16.39 trillion by the end of December,
unless Congress votes to raise it again. Watch
the adolescent bickering, as it makes good
theater. See the Fox News article (CLICK HERE).

The Extended Alternative Fiscal Scenarios are becoming a theater of the absurd.
Projections reach exponentially to the heavens
for debt, while the economic size measured
by GDP stumbles. The odds are rising fast
for going over the fiscal cliff, in the sense
that a severe sequence of events in consequence
is likely. The pathways are more clear, with
the presidential election over, and the past
patterns likely to extend in straight lines
due to continued reckless behavior by the
Obama Admin and the arena of partisan fools
known as the USCongress. Harry Reid is a special
kind of pugilist fool, who stole his own Nevada
Senate re-election in 2008. Nancy Pelosi is
another special kind of harlot fool, always
there to protect her family investments. See
the Zero Hedge article (CLICK HERE).

For a worthwhile tour of the USGovt debt nightmare on Pennsylvania
Avenue, peruse the article by Antony Mueller
from the Federal University of Sergipe in
Brazil. He covers the size of the debt including
its compounding due to interest, the interest
rate (and inflation adjusted rate of interest),
the determinants of public debt, and the options
left to manage the debt. He urges free enterprise
as part of the solution required in difficult
decisions in many leading nations. That has
not been the pattern, since crime is preferred
over free enterprise. See the Financial Sense
article (CLICK HERE).

◄$$$ SOCIALISM THAT GALLOPS INTO AMERICA
LIKE A WRECKING BALL. THE ECONOMIC EFFECTS
ARE EXTREMELY DAMAGING. NATIONAL INCOME IS
DOWN HARD. THE FISCAL DEFICIT IS SURE TO RISE
BY JUMPS. THE WORLD HAS BEGUN TO SHOW AWARENESS.
$$$

The Obama re-election, whether tainted or not, brings extreme emphasis to a
nasty concept of socialism. When adopted,
when the welfare state expands, a certain
tipping point can be reached. The wealth
necessary to sustain a socialist system must
be enormous, or else it topples when the beneficiaries
grow too large. A great quote was heard,
with unknown source, packed with wisdom. "Sooner
or later, Big Government's clients will outnumber
those who pay for the criminal extravagances
of their voracious welfare state."
How deeply and sadly true, a lesson few seem
to comprehend.

Debt by nature is not bad or good, but rather depends on the usage and the borrower's
standing. The private sector has reacted to
the national excessive indebtedness by de-leveraging.
Often to be sure, it has been done through
bankruptcy and home foreclosure. Some paid
debt down purposefully, while others under
duress defaulted. Meanwhile, the USGovt has
done the exact opposite. Since 2008, households
and businesses have extinguished 67% of their
debt when measured against GDP. In sharp contrast,
the USGovt has ramped up its borrowing by
52% of GDP since 2008. When done for business
purposes, hiring people, building the client
base, expanding business, it is for good.
When done for enriched entertainment like
with an extra plasma television or a extra
vacation or a new wardrobe or a lavish home
addition, it is not for good. See the Testosterone
Pit article (CLICK HERE)
to monitor the data on the government drag
on the USEconomy, and its refusal to participate
in the debt reduction process.

President Obama will go down in history as the worst fiscal president in the
nation's history, worse than Bush Jr. The
USGovt will be bankrupt after another four
years of on the same path. The end of the
road with a debt default should arrive before
his tenure ends. The Fitch debt rating agency
has threatened another debt downgrade, which
will cause a wakeup call possibly, but possibly
not. Charles Biderman from TrimTabs summarized
the painful medicine from the last four years.
Since Obama took office, the after-tax takehome
pay for citizens who pays taxes is still down
by 5% nominally (before any adjustment) and
down over 10% after inflation. The outspoken
and vitriolic Biderman said, "My guess
is that Mr Obama and his close buddies have
no idea what they are doing, or else they
would not be doing what they have been doing.
The most dangerous are those people who think
they are smarter than they are." See
the Zero Hedge article (CLICK HERE).

A slight disagreement here. My belief is that Obama was selected to bring down
the nation, and to establish a marxist dictatorship
on the scorched earth and ashes. The ObamaCare
project is the extraordinary wet blanket to
smash small business. The most dangerous men
are those who sabotage the system and deceive
the public along the path to destruction.
That opinion is confirmed by some powerful
contacts who have access to various US
security agencies, the same who operate puppet
strings to the White House. They gave Obama
the marching orders in January 2009, with
a $1 billion reward payoff to get the job
done. They selected him after he cut his dirty
teeth on a special project in Chicago
several years ago. With his influence, he
helped to steal Household bank accounts to
cover several gutted Arkansas
banks. The project was a favor done to benefit
Clinton, who needed to cover some old tracks.
Rahm Emanuel was involved, later rewarded
with the post of White House Chief of Staff.
He used the post as a platform to become the
Mayor of Chicago. It is all a twisted tangled
ugly web of corruption. The Fascist Business
Model has many sides, many leaking swill ports.
This is one.

◄$$$ SIGNIFICANT JOB CUTS WILL FOLLOW THE OBAMA RE-ELECTION VICTORY, EVEN
IF TAINTED. SMALL BUSINESS WILL REACT TO THE
HIGHER COSTS. THE UNCERTAINTY HAS BEEN REMOVED,
WHILE THE CORPORATE OPPRESSION BECOMES MORE
CLEAR. THE COST BURDEN WILL RESULT IN WIDESPREAD
JOB CUTS AND PRICE HIKES, SURE TO HAMPER THE
USECONOMY AND MAKE WORSE THE RECESSION IN
PROGRESS. THE JOB CUTS ARE THE MICRO-ECONOMIC
EFFECT. THE FISCAL DEFICIT GROWTH IS THE MACRO-ECONOMIC
EFFECT, ALONG WITH GLOBAL REJECTION. $$$

The stories are many, but they all read the
same. More costs to businesses. They object
but have no choice. So they are cutting jobs
in response. The Obama Admin has almost no
concept of capitalism or business. Plenty
of talk, but most action is counter-productive.
Thousands of businesses will no longer
wait for more certainty. They know that new
national health care system will be enforced,
and will respond with job cuts and price hikes.
They know of the higher embedded taxes. They
will release workers, as they raise prices.
The colossus of the federal machinery will
impose its extreme inefficiency and corruption
next.

Murray Energy Corp, whose Utah subsidiary runs the coal mining project in West Ridge located in
Utah,
has taken action in response. Bob
Murray laid off 102 Utah miners right away
after the Obama win, pointing out that
the takers outnumber the producers among people
nationwide. They have spoken. So he has reacted.
He asked for understanding for decisions that
his company must make to preserve the very
existence of any of the enterprises built
over many years with hard work and good judgment.
See the Salt Lake Tribune article (CLICK HERE).
His story can be re-told by an archipelago
of companies scattered across the nation.

The Kevin Wall talk radio show in Las Vegas attracted much attention for an interview it ran with an established
Las
Vegas business owner. During the interview,
where the owner remained anonymous, he explained
his business situation, which is repeated
across the land. He has 114 employees fired
22 workers the day after Obama won the re-election.
He chooses to survive in his business
in the wake of the national health care program
and its tax imposition. Radio show host Kevin
Wall on KXNT pronounced the message that elections
have consequences and that ultimately the
business needs to survive. The quote from
the unnamed business owner is heart felt and
compelling, but based in wise decisions. It
is worth reading. See the CBS Local article
(CLICK HERE).

The owner of the national restaurant chain Dennys reacted in a different way.
John Metz has given orders for a new 5% surcharge
to be put on every customer bill, which will
cover the ObamaCare expense. The menu will
not change otherwise. He also will cut back
on worker hours. Some precedent exists, as
airlines attach a surcharge on ticket costs
for the added security measures mandated following
the 911 attacks. Metz boldly comments that customers can tip the
wait staff less, since they ultimately are
the beneficiaries of the national health care
program. Games are being played by businesses
with part-time status and work hours, in order
to comply or work around the new law. Either
workers are cut or prices rise, in response
to the socialist measure to impose health
care in a national program. See the Huffington
Post article (CLICK HERE).

##
USDOLLAR CHALLENGED BY THE YUAN

◄$$$ THE CHINESE YUAN COULD GRADUALLY BECOME THE GLOBAL STANDARD SETTLEMENT
CURRENCY AS FAR AS TRADE IS CONCERNED. THE
CONSEQUENCE WILL DIRECTLY AFFECT GLOBAL BANKING
RESERVES MANAGEMENT. IT IS UNCLEAR HOW THE
QUASI-STANDARD WOULD AFFECT RESERVES HELD
IN THE MAJOR GLOBAL BANKING CENTERS. TRADE
DICTATES CURRENCY ADOPTION, WHICH LEADS TO
BANKING SYSTEM ACCUMULATION OF RESERVES. NATIONS
HOLDING MORE YUAN CURRENCY WILL CONDUCT MORE
TRADE WITH CHINA
IN A VIRTUOUS LOOP. THE
UNITED STATES WILL BE PUSHED OUT OF THE TRADE
LOOP. $$$

Much debate and consternation have come concerning the ascendance of the Chinese
Yuan currency, in its upcoming role to replace
the USDollar as the world's reserve currency.
Implications to bank reserves management are
important and huge. Trade settlement adopted
standards will drive the shifting process.
Unlike what many American analysts believe,
the Yuan is coming on fast to take over the
role as trade settlement currency, a big blind
spot to Western think tanks. The Asians
have almost adopted it in a uniform trade
pact, for usage widely. The phalanx of the
Chinese bilateral swap agreements clears the
path for wide usage. Asia
is already committed to Yuan usage, since
they wish to avoid the USDollar subject to
unbridled USGovt debt and unfettered USFed
inflation, the risk compounded by bond fraud.
Arvind Subramanian and Martin Kessler at the
Peterson Institute of Intl Economics commented
on the arrival of the Renminbi Bloc. They
wrote, "A country's rise to economic
dominance tends to be accompanied by its currency
becoming a reference point, with other currencies
tracking it implicitly or explicitly. For
a sample comprising emerging market economies,
we show that in the last two years, the renminbi
(RMB) has increasingly become a reference
currency which we define as one which exhibits
a high degree of co-movement with other currencies.
In East Asia, there is already a RMB bloc, because the RMB has become the
dominant reference currency, eclipsing the
dollar, which is a historic development."

The same authors present a case for the Chinese currency ro rise in a region
that the United States has dominated for several decades.
Except for Hong Kong and two other minor
nations, the USDollar has been largely abandoned
in Asia. It appears
that China
is lifting all of East
Asia, by serving as its primary customer in
trade. East Asia is already
forming as a Renminbi trade bloc. The currencies
of seven out of ten countries in the region
(South Korea,
Indonesia, Taiwan,
Malaysia,
Singapore, and Thailand) track the Chinese Yuan more closely
than the USDollar. For example, since mid-2010,
the Korean Won and the Yuan have appreciated
by similar amounts against the USDollar. Only
three economies in the group (Hong
Kong, Vietnam, Mongolia) still have currencies following the
USDollar more closely than the Yuan. The main
force behind the currency shifts is trade.
The Chinese share of East Asian manufacturing
trade has risen from 2% in 1991 to about 22%
this year. Countries that sell to the
growing Chinese market, or which serve within
the vast supply chains focused on China find
an advantages of maintaining a stable exchange
rate against the Yuan currency. It simplifies
business and its accounting. Beijing leaders have been repeating the 2% to 3% cost savings repeatedly
in a corrall process.

The authors concluded, "This development has two implications. First,
it is one more important marker in the shift
of economic dominance away from the US
and towards China. Not only is China,
by some measures, the world's largest economy
in purchasing power parity terms, the world's
largest exporter, and the world's largest
net creditor (for more than a decade), but
the Renminbi bloc has now displaced the Dollar
bloc in Asia. The symbolism and its historic
significance cannot be understated because
East Asia, despite physical
distance, has always been part of the dollar
backyard." See the Financial Times
article (CLICK HERE).

Frequently a rehash of easily rebutted arguments must be done, since much disinformation
circulates concerning the Chinese Yuan and
its ascendancy. The critics seem ignorant
of the absent US
industrial trade, at the same time bond fraud
has cut off investment trade. The USDollar
and USTBond are being isolated. Shedlock
makes a silly comment that no nation wants
ownership of the reserve currency, since currency
wars are proof. How absurd! Currency wars
are about preventing a home currency exchange
rate from rising sufficiently to render deep
harm to the domestic export trade. Such wars
have nothing to do with global currency reserves,
except that successful nations observe their
native currency rising against the US$ benchmark (reserve today).

Some believe the Chinese Yuan could never act as global reserve since the Chinese
bond markets are not big enough or deep enough.
The volume is too small. True enough. But
a massive additional economic expansion could
be enabled if the Chinese embarked on a broader
more liquid bonded security debt offering
program. They could field a bigger military,
for instance. They could buy all the world's
shipping facilities and distribution centers.
The risk would be taken by foreign investors.
Foreign direct investment in industrial plant
and equipment would be replaced by bond offerings.
Furthermore, if more nations hold the Yuan
as reserve currency, they are more likely
to conduct large scale trade with Chinese
companies. This is the whiplash against the
USEconomy, as foreign nations will eventually
grow intolerant of unfettered US
bank corruption and reckless USFed monetary
policy deeply committed to hyper monetary
inflation. Some believe owning the reserve
currency is a a curse more than a blessing.
Sometimes it is, especially when it forces
a harsher scrutiny on bad economic policy,
corrupt banking practices, and lazy fat citizenry
who would rather collect welfare than work.
Owning a reserve currency often results in
tremendous debt buildup, due to inertia. Some
believe that China
does not want to command the global reserve
currency. This point is totally incorrect,
as Chinese leaders eagerly desire the associated
respect and global leadership that comes with
the reserve currency seat. It brings power!!

Even though Michael Shedlock believes Michael Pettis to be the foremost expert
on international trade, his admired analyst
made some highly obtuse comments. He has his
cranium squarely placed up his rectum with
the point that the United States does not exact any exhorbitant privilege
by controlling the global reserve currency.
Pettis actually called it a burden to the
USEconomy. Incredibly obtuse, since the USDollar
control enables vast bond fraud and USTBond
counterfeit in the multiple $trillions for
each. Its control enables a consumer economy
that does not pay its bills, otherwise known
as undeserved higher standard of living. Its
control also enables larger deficits without
obstacle for welfare state expansion or adventure,
even aggressive wars without obstruction.

This erroneous viewpoint to deny advantage is common among the entrenched financial
harlot community led by Wall Street. Also,
contrary to Pettis logic, an artificially
lower interest rate afforded by global purchase
of the USTBond debt securities has enabled
much lower costs for consumer loans and even
mortgage loans. Pettis claims that no country
can accumulate its own currency in reserves.
Tell that to the US Intelligence agencies,
which accumulate containers loaded with shrink
wrapped $100 bills in the multiple $billions.
They also store hundreds of $billions in US$-based
accounts in the Panama
and British-dominated Caribbean
banking system. The rest of Pettis commentary
should be ignored. See the Global Economic
Analysis article (C LICK HERE).
Shedlock provides some excellent information
and analysis at times, but also some truly
dumb stuff to make his work very inconsistent.
From comments taken by subscribers who have
met him, Shedlock spends a lot of time admiring
himself with a frequent highly arrogant tone.
Fame has gone to his head.

◄$$$ CLEARING THE PATH FOR GLOBAL CURRENCY. NEW METHODS ARE LINED UP TO
BOOST INTERNATIONAL USAGE OF THE YUAN. IN
THE LAST TWO YEARS, AN IMPRESSIVE SURGE IN
YUAN USAGE IN GLOBAL TRADE HAS BEEN REALIZED.
MORE IMPROVED YUAN CLEARING FUNCTIONS ARE
REQUIRED AND BEING URGED BY TRADE PARTNERS.
ONLY 10% OF CHINESE TRADE INVOLVES THE YUAN
CURRENCY, THUS A SMALL HOT MONEY RISK. THE
PROCESS IS EVOLVING TOWARD THE YUAN ACTING
AS A GLOBAL TRADE STANDARD, WHICH IS PRECURSOR
TO GLOBAL RESERVE CURRENCY. $$$

Irony runs thick. The SWIFT organization actually advocates a more efficient
system to be in place for facilitating the
increasingly wide use of the Chinese Yuan
in global transactions. The Society for
Worldwide Interbank Financial Telecommunication
(SWIFT) is the platform among international
banks. But China might act as intermediary
for Iranian banks. The irony is due to the
SWIFT weapon used by the USGovt, then withdrawn.
Global use of the Yuan currency has surged.
In August the Yuan usage rose to 14th in the
table of payment currencies, up from 35th
in October 2010, according to the organization's
report. Bilateral swap facilities arranged
by Beijing
paved the way for the advance. Making payments
in Yuan means domestic companies will see
lower borrowing costs and reduced foreign
exchange risks. The Peoples Bank of China
estimates that overseas importers can save
2 to 3 percent on their invoice bills by paying
in Yuan. That adds up fast. In addition, the
report stated that some buyers of Chinese
products and their suppliers prefer the currency.
It is less a bone fought over like the USDollar.

The PBOC central bank has been working to ease so-called hot money fears. If
the Yuan is suddenly the victim of fast money
exiting China,
then a wide assortment of trade partners will
suffer the impact on exchange rates. But China
is not Thailand, the site of the
1995 Asian Meltdown. Consider that trade denominated
in Yuan accounted for only 10% of China's
total foreign trade in July, the SWIFT report
stated. The low figure reduces hot money risks
greatly. Patrick de Courcy serves as head
of Asia-Pacific markets for the organization.
He believes the path of the Yuan's further
acceptance in global markets will involve
three phases: trade finance, investment, and
reserve currency. He identifies challenges
ahead, such as improvements to offshore clearing
functions in Yuan usage. He called for an
enhanced platform. Seamless routing is desired,
executed quickly. A typical payment in USDollars
can be settled within seconds, while settling
in Yuan takes much longer.

Offshore Yuan clearing can be accomplished in two ways. The first would have
the transaction go through the designated
clearing bank, Bank of China in Hong
Kong. The second option would have it go directly
to a Yuan agent bank on the mainland. As of
now, the Bank of China (located in Hong
Kong) processes about 80% of offshore Renminbi
transactions. Some limitations exist. The
HK center has extended operating hours since
June to facilitate businesses in other time
zones. But the foreign exchange market in
Hong Kong closes at 5 pm, which obstructs European markets from overnight
trading. The second agent bank route handles
20% of the Yuan clearing volume, in which
cash can only be withdrawn from the People's
Bank of China at 9am the next day. This is
cumbersome. Many European companies hoping
to use the Yuan more extensively complain
about the slow payment process and difficulties
in obtaining approval for letters of credit,
according to a recent survey by the Deutsche
Bank. See the China Daily article (CLICK HERE).

By the way, in a defiant action South Korea has resumed its
purchase of Iranian oil. In the spring
months of 2012, the Asian powerhouse had complied
with USGovt pressures to avoid further oil
trades. No longer. The resumption indicates
the possible interweaving of Chinese Yuan
swap funds or other devices in a workaround.
China has a deal already in
place to handle any Russian oil trade settlement.
It would be an easy extension for China
to handle Korean oil sales also. See the Fars
News article (CLICK HERE).

◄$$$ THE ENFORCED HONG KONG CURRENCY PEG TO THE USDOLLAR IS UNDER RENEWED STRAIN. DUE
TO THE PRESSURE, FUNDS FLOW TO CHINA. THE HONG KONG DOLLAR
EXCHANGE RATE IS SLOWLY RISING. STRAIN IS
SEEN IN THE H.K. PROPERTY MARKET. EVENTUALLY
THEY WILL ABANDON THEIR USDOLLAR PEG WITH
SHARED MONETARY POLICY. SOMETHING BIG IS HAPPENING,
WHICH WILL BE MADE CLEAR OVER TIME. $$$

The Hong Kong Monetary Authority moved to weaken their domestic currency in
response to a slow rise. In late October,
the HKMA sold 4.67 billion HK dollars (=US$0.60
bn) worth of foreign bonds to reduce the value
of the local currency. Over the last two
weeks in November, another US$3.5 billion
has been sold in addition. The HKDollar started
trading at 7.7500 per 1US$, the upper limit
of its managed trading band. This is the
first time since December 2009 for the HKMA
to intervene in the FOREX market to balance
the massive capital inflow that Hong
Kong has received in recent times. The Quantitative
Easing (QE) program by the USFed has combined
with the European sovereign debt crisis to
hasten the movement of money seeking safe
havens. An official HKMA statment read, "The
recent increase in demand for the local currency
is related to a less strained European market,
weakness in the USD, and declining US interest
rates, which have prompted capital inflows
into currency and equity markets in the region."
To the point and covers the global blemishes.
The Hong Kong monetary position is different
from the other Asian nations, since the city's
interest rates are aligned to that of the
United
States, and a narrow
currency band is enforced.Hong
Kong authorities do not want cheap money flooding
into the property markets to push already
high prices even higher. They are already
worried about a property bubble and a likely
crash later. See the Information Daily article
(CLICK HERE).

KC Chan, Secretary for Financial Services and the Treasury, re-asserted the
rigid Hong Kong commitment
to the pillar of its monetary policy. The
currency peg has endured for 29 years. In
the past it removed fluctuations and volatility,
the likes of which damaged Thailand
and Korea in 1995. Nowadays,
the city state has been under pressure as
it operates as China's window to
the West, even its clearing bank for trade.
Chan insisted that the monetary policy will
not change. Along with Japan,
the Hong Kong banks have
been a popular destination for Asian money
seeking safety from the reckless USFed bond
monetization cancer. See the Market Pulse
FX article (CLICK HERE)
and the SCMP article (CLICK HERE).

Some comments came from a sharp bond and currency analyst contact watching the
situation closely. He pointed out that over
the last two weeks, the HKMA has intervened
four times to hold the peg, which itself is
unprecedented. It means that pressure is building
with the destructive policy adopted by the
USFed. Also, the usage of Chinese Yuan
is increasing at the expense of the USDollar,
since Hong Kong serves
as the new trading center for trade settlement
clearing functions. With the HK rates aligned
to US rates, significant hot money is forced
into real estate, causing a bubble atop what
was already a richly priced market. The authorities
have taken various measures to curb the extreme
pressure point in the property market. Money
has begun to flow back into Mainland China, prompting the HK officials
to expand the property tax to more areas.
We are starting to see something unusual and
defiant. It is capital control in reverse,
essentially telling the Americans to keep
their USDollars with them. It is a de-facto
devaluation of the USD via taxation. If clients
wish to exchange USD, fine. But the conversion
will be done with a tax imposed. The end game
is moving quite fast as a lot of USD seems
trapped and is desperately seeking avenues
to invest in and diversify.

The HK banks have imposed measures to curb the property bubble. They are requiring
buyers to post more capital (down payment)
and limit the tenure of mortgages to 30 years.
They are using regulations to curb the monetary
speculation. Hence breaking the currency peg
is going to be very difficult. The peg
will eventually break, but only when pressure
reaches extreme levels, and the USDollar loses
its prestigious role in trade settlement more
emphatically. That event could come with
the removal of the US$
payment related to Saudi and OPEC oil sales.
The decision will be political. If not done
with a Petro-Dollar disruption event, the
decision will coincide with a serious break
in China-US relations. The scrapping of the
HK currency peg will be a very big geo-political
signal. Hence it will not happen without a
major event. An important question is whether
the pressure on the HKDollar due to moderate
speculation driven by the USFed policy of
USDollar debasement, or whether the smart
money genuinely is looking to diversify away
from the USDollar as its demise is near.
My belief is both are at work, one a short-term
factor, the other a long-term factor.

Any global peg to the USD is bound to fail after sustained pressure. About a
year ago, my excellent gold trader source
was asked his view on the HKD. He does significant
business with both Hong Kong and mainland
China
wealth funds. My main point made with him
for months up to that point was that the HK
bankers had hitched their wagon to a broken
train. My expectation was for them to break
ranks and abandon the peg soon. The Voice
shared the perspective that the HK bankers
had a backup plan, but the time was not yet
right to execute it. They were very busy
attracting Mainland China money into the safe
haven of HK banks, and enjoyed the relish
of heavy fees. They will manage the consequences
with the real estate market. The price inflation
pressures were rising, but were being ignored
at the time. My belief is that the contingent
plan described by The Voice is nearing execution,
not next month, but in the near future. Time
is running out for the USDollar.

With all the recent commotion happening inside China
with banks, stocks, coins, commodity order
cutbacks, Japan strains, my gut tells that the HK-China
connection is under some new strain. However,
in offset is the giant role played by HK in
trade settlement clearing functions. The strain
is showing, and resolution will come. In
my view, a race is on to see which abandons
the USDollar first, Hong Kong or Saudi Arabia. My bet is the Saudis, since assault
on the royal regime is multi-faceted. Tremendous
disruptions come for the USDollar and soon,
in consequence to the US elections and the fiscal
failures.

◄$$$ THE ARRIVAL OF PRICE INFLATION WITHIN THE UNITED STATES IS NEXT,
OF THE PAINFUL VARIETY. THE USDOLLAR PROBLEMS
WILL CAUSE PRICE INFLATION, RATHER THAN PRICE
INFLATION RENDERING HARM TO THE USDOLLAR EXCHANGE
RATES. A CRUCIAL DISTINCTION. THE USFED BOND
PURCHASES AND USGOVT DEPENDENCE HAVE UNDERMINED
THE GLOBAL PRESTIGE BEHIND THE USDOLLAR. HOWEVER,
THE GLOBAL REJECTION OF THE USDOLLAR IS FAR
MORE A FACTOR FOR THE ARRIVAL OF PRICE INFLATION
WITHIN THE USECONOMY. IT COMES NEXT. $$$

The gold community is abuzz about the onset of radical price inflation. It will
not arrive directly from the USFed bond monetization,
even though their hyper monetary inflation
is ramped up with steroids. No question that
the central bank has installed a vast inflationary
apparatus, starting a few years ago with numerous
(alphabet soup) liquidity facilities, and
climaxing with a series of unsterilized and
sterlized bond monetization initiatives. However,
the price inflation has been contained from
widespread economic damage, seemingly intentional
deep harm to worker income due to job cuts,
and common liquidations of businesses.
The USFed research calls it the restriction
of final demand, enough to calm commodity
prices. The financial sector has been the
first, second, and third recipients of the
monetary largesse, seen in the form of bond
redemption and bailouts to cover huge losses.
The effect has not overrun into Main Street where businesses are run and people
are employed. The economic effect is dominated
by wreckage and liquidations, not higher wages
to meet the rising costs for everything. The
higher cost structure is the principal effect
felt in the mainstream economy, extended from
the USFed QE programs. That is NOT systemic
price inflation, but rather something worse
where people and businesses cannot handle
the higher costs. Income is not rising, nor
is final product pricing.

The price inflation soon to hit the USEconomy again will be much like what hit
in 2011, given as prelude. Rising costs were
felt due to the badly debased USDollar. Back
then, the USDollar was more isolated in the
impact effect. In the last year, the impact
has been shared by mutually assured destruction
among the major currencies, as each major
central bank has joined the QE debasement
parade. Thus the Gold price has risen
even when the USDollar DX index has been flat
for seven years. The central bankers have
side-stepped the Competing Currency War, by
turning to universal uniform debasement. What
comes next is the rejection of the USDollar
and repudiation of the USTBond, its main vehicle.
Price inflation will hit the nation from a
weakened currency, which will be increasingly
isolated. The impact will be located on rising
cost structure for households and businesses.
But it will be much greater than 2011.

Many pundits have it backwards, as usual. The USDollar will not be harmed as
a result of price inflation hitting the national
economy. Instead, the USDollar will fall in
valuation, resulting in higher import costs
and thus higher price inflation. Focus
on the US Socialism endorsement,
combined with refusal to deal with the USGovt
spiral of deficits, both will lead to USDollar
rejection. It will take place in trade settlement.
Do not expect hyper-inflation to hit the states
anytime soon, at least not until the USDollar
is rejected. What businesses will increase
wages across the board? None. It is not that
the US
domestic price inflation will rise high enough
for the USDollar to be replaced. It is that
eventually the USDollar will be so isolated
and ignored that the impact will hit the USEconomy
which will cause price inflation and supply
shortage.

Expect shortages to arrive in the next year, from controlled market price efforts.
The controls will be done in pure Socialism
lunacy. The maestros never stop attempting
to control the financial markets, as almost
every single one is under heavy control mechanisms.
As for when the USDollar will no longer be
used in global trade, difficult to say, but
the movement is gaining momentum in a frightening
pace. The USDollar will continue to be used
with Eastern Canada, Breat Britain, and most of Western
Europe. However, the isolation from the rest
of the world is being planned, with platforms
ready to be implemented, sure to occur by
2014-2015.

##
BANKS REELING IN DESPERATION MODE

◄$$$ DAVID EINHORN EXPLAINS HOW BEN BERNANKE IS DESTROYING AMERICA.
THE ZERO PERCENT POLICY IS HARMING CAPITAL,
WITH A NET DAMPENING EFFECT. A MULTIPLER EFFECT
IS AT WORK FROM EXPECTED SMALL FUTURE RETURNS
ON SAVINGS. GROUP THINK BY ECONOMISTS IS A
USELESS RUBBER STAMP. THEIR MACRO MODELS ARE
USELESS, SINCE THE CURRENT CLIMATE HAS NO
DATA SAMPLE FROM THE PAST. THE MORAL HAZARD
HAS OPENED UP GIGANTIC TAIL RISKS. CHAIRMAN
BERNANKE HAS WRITTEN THE USGOVT DEBT EPITAPH,
BY COMMITTING TO THE LAST ASSET BUBBLE IN
USTBONDS. $$$

David Einhorn is from Greenlight Capital has fast become an insightful superstar.
He barely looks 25 years old, but he is both
bold and brilliant. He dissects what is wrong
with the USFed constant punch bowl theme,
dubbed QE, the free monetary lunch. Einhorn
essentially accuses the central bank of wrecking
the nation with destructive monetary policy,
acting as the liquor dealer with infinite
supply and near zero cost. More is not better,
and forever is not temporary. The Jackass
point made for over a year is that 0% destroys
capital. Einhorn would concur with my main
theme, as he adds many points to the indictment.
Here are his major points.

USFed policies are not helping the USEconomy, but rather actively destroying
it. Group-Think contributes to expanded and
amplified false assumptions, having produced
a wrong-minded consensus. The entire established
economist community has chosen the perpetuation
of their jobs, their tenure, and their paycheck
for as long as possible, and thus backs the
Chairman fully and unconditionally. Research
funds and salaries are at stake. The ever
easing monetary policy has reached beyond
the point of diminishing returns. Their policy
is a major drag, a headwind that slows any
recovery. The investment community merely
front runs the USFed, with no mind at all,
seeking a risk-free trade. The result is
fewer market participants, lower bank bank
revenues, bank employee terminations, lower
federal and state tax refunds, and so on,
in a vicious cycle. The central banks
have seen broken ranks with the recent Bundesbank
decision to pull its gold inventory from London.
It faced the quintessential dilemma, and made
the right decision in full accounting.

Einhorn misses an important point. He assumes that the motive of the USFed actions
behind Quantitative Easing is centered on
best intentions to stimulate the economy at
the consumer level, to produce jobs, and to
kickstart the recovery. That is grossly incorrect.
The QE motive is to avert a USGovt debt
default, to avoid exposure of the global disdain
shown by typical USTBond holders (boycott)
to purchase new debt, to enable the redemption
of toxic fraud-ridden mortgage bonds, and
to cover up multiple $trillions in mortgage
bond fraud and USTreasury Bond counterfeit.
To be sure, Einhorn deserves credit for his
boldly stated position presented at the Buttonwood
Conference.

Einhorn goes on with sharp astute criticism, much of which coincides with Jackass
points. He points out how lower rates drive
up the cost of commodities, especially food
and energy. The oil costs go directly out
of the country in flow of funds. The absent
yield on savings causes both higher risk investments
and money hoarding in the form of money market
funds. Money exits the banking system.
The hoarding from denied interest on individual
savings is driving down consumption and business
expansion. The USFed policies are protecting
the upper class at the expense of the shrinking
middle class, in an ongoing catastrophe. A
change in behavior is in the works, a profound
change, as a consequence of multiple years
of a Zero Interest Rate Policy, probably to
last at least seven years, very likely until
the runaway inflation finally slams the nation.
The dampening effect from low yields is at
work, to enforce a change in behavior on a
multiplied basis. Most theoretical macro
economists are locked within their myopic
models, never having worked in the real world,
never having held responsibility for profit
& loss. Their sample sets do not include
the current financial situation in any similar
past era, which is both bizarre and the new
norm. No macro models have any value whatsoever
anymore. The moral hazard has opened up gigantic
tail risks, which means extremely unlikely
events suddenly thrust forward as highly likely.
The main perceived risk is that the USFed
loses control or suffers from its own insolvency.

The last 15 years have been spent learning that a monetary
policy to create asset bubbles is both bad
science and highly destructive to economies
and wealth. Yet the USFed is desperate to find a new asset bubble
to replace the housing & mortgage twin
bubbles. That new bubble is the USTreasury
Bond itself. The central bank knows nothing
else, only inflation engineering. One should
not criticize an institution steeped in inflation
science from doing what it does best, creating
the next bubble. The USTBond bubble is the
last bubble, the Towel of Babel as described
by the Jackass this May, to be followed by
the Black Hole when it collapses most assuredly.
Accolades and Nobel Economics Prizes mean
nothing when those receiving adulation and
holding medals preside over ruin. The same
goes for Obama and his spurious Nobel Peace
Prize without a single accomplishment. That
was a giant FU to the world from the narco
barons.

The epitaph of the central bank franchise system has
been written by Bernanke. By promising to
continue the QE until the USEconomy recovers
convincingly and until the labor market improves,
the Chairman is issuing a death warrant. The QE and ZIRP assure continued capital destruction
from a rising cost structure, reduced business
investment, and inefficient allocation of
capital toward speculation. The hedge practices
conducted in defense of the caustic USFed
monetary policy work against recovery and
improvement. The take money out of the system
and raise costs, in a vicious cycle. The big
banks are committed to the USTBond carry trade
for easy profits, guaranteed by the USFed
itself. More money removed from the system.
Such aberrant bank behavior also assures
inadequate capital for business formation
at a time when the cost structure is rising.
The economists at the USFed must realize this,
but they are committed to toxic bond redemption
and bond fraud coverup. They are also liars.
The monthly commitment of $40 billion for
bond purchases is actually $85 billion per
month ($1 trillion per year), made clear in
public statements with much smaller audience.
See the Zero Hedge article (CLICK HERE).
The central bank monetary policy is managing
a death process, an unstoppable pathogenesis.

◄$$$ US-BANK REGULATORS BACKED OFF ON THE HARSH RESERVE REQUIREMENTS THAT
ARE KNOWN AS BASEL-III. THEY BLINKED BECAUSE
THE US-BANKS DO NOT HAVE THE ADDITIONAL $1
TRILLION IN COLLATERAL REQUIRED TO FORTIFY
THE DERIVATIVES INSANITY. THE NEW HARSH RULES
ARE INDEFINITELY PUT ASIDE AND POSTPONED.
THE INSOLVENT US-BANKING SYSTEM WILL REMAIN
A SHAM SHELL GAME. $$$

Predictably, in early November the USFed issued a statement
to notify of the fromal delay in implementation
of the Basel III capital rules which were
to go into effect January 1st. Apparently JPMorgan and Goldman Sachs
whined that they were not ready for the implementation,
and were hundreds of $billions short on the
collateral required. The prudent but harsh
rules have been postponed indefinitely. So
no additional capital buffers will be required
to sustain the $zillions in derivatives which
serve as levered cables and pylons for the
US banking system foundations
and platforms. In a fit of prudence last June,
the US Federal Reserve and two other bank
regulators introduced a proposal to implement
the global strictures that suggested an effective
date of January 1st for compliance. However,
the regulators admitted to hearing a wide
range of views of the urgent need for delay,
in their words from the affected financial
firms.

Conclude that the big US banks do not have the funds necessary to provide
collateral for over $100 trillion in derivatives
put in place since the 1990 decade when the
US
banking system suffered a fully hidden collapse.
It has not recovered, and will not. The financial
crisis of 2008 was simply a visible event
on the same sequence. Other international
agencies have delayed implementation of bank
rules. See the Market Watch article (CLICK
HERE).
One is left to wonder if the Basel Boyz are
at war now with the USFed for defiance. The
Basel
lords in my view wish to collapse the entire
system and impose global fascism. Perhaps
the timing is not right. Sheer conjecture
here.

◄$$$ THE THREAT OF A US-BANK RUN COULD BE IMMINENT, SINCE THE EXPANDED
F.D.I.C. DEPOSIT INSURANCE ENDS DECEMBER 31ST.
THREATS TO THE SYSTEM ABOUND AS THE NATIONAL
ATTENTION IS FOCUSED ON THE USGOVT FISCAL
CLIFF, THE VAST STORM DAMAGE TO THE NORTHEAST,
AND THE CONCLUDED PRESIDENTIAL ELECTION. THESE
THREE EVENTS COULD TRIGGER A SUDDEN DEPARTURE
OF FUNDS IN ACCOUNTS. IF THE USDEPT TREASURY
FOLLOWS THE EUROPEAN SAFE HAVEN EXAMPLE, THEY
MIGHT OFFER NEGATIVE YIELDS ON SHORT-TERM
USTBILLS. THAT WOULD CAPTURE A LOT
OF BAD ATTENTION. $$$

With the media fixated on the USGovt debt with the fanciful fiscal cliff, few
seem to be noticing the fact that the expanded
100% FDIC coverage for insured deposits ends
January 1st. That is a mere 44 days away.
Other major distractions are the massive hurricane
and flood damage, primarily located in New
Jersey and New
York. The re-election of Obama is yet another
distraction. All three events could serve
as powerful motives for people to remove funds
from banks in fear of general risk, in addition
to the removed FDIC full insurance coverage.
People will require their funds. Other people
will fear the USGovt need for cash could possibly
result in bank problems. Regardless, the risk
of a bank run within the US
banking system should be recognized, possibly
not in acute fashion but a notable risk nonetheless.

The US
banks hold $1.6 trillion in deposits, of which
85-90% are in the form of deposits within
the insolvent money center banks, mostly located
in New York. As of January 2013, the FDIC will halt the generous
100% coverage for insured deposits. The insurance
will revert back to $250,000 per depositor
account as before. The sudden effect will
cause many large depositors to flee from the
insecurity of the much reduced FDIC coverage,
at a time when other banking risks appear
on the rise. Some astute analysts expect the
departing depositor funds will seeks out the
safety of short-term USTreasury Bills, even
though they offer paltry yields. A possibility
exists for the USDept Treasury, in order to
handle this flood of money, could offer negative
interest rates. The move would not be
isolated, since such financing would resemble
the 0.5% negative interest rate offered by
the Swiss and German Govts on the funds flooding
to their banks from Spain,
Greece,
and Italy. Money has become like
refugees crossing borders, seeking safety,
not finding food. What occurs in the United
States could result in
a bank run much larger than what the Euro
banks are seeing in a grand flight to safety.
See the Silver Doctors article (CLICK HERE).

◄$$$ RESERVE BANK OF AUSTRALIA IS SUSPECTED OF
PRINTING AUSSIE DOLLARS. THEY TRIED TO COVER
THEIR TRACKS WITH FOREX TRADES AND FOREIGN
ACCOUNT SHUFFLING AFTER HEAVY INTERVENTIONS.
SOME DECEPTION IS EVIDENT. $$$

The Reserve Bank of Australia (RBA) might be printing money. Desperation will
do that. The RBA could be printing heaps of
Aussie Dollars, so claim UBS analysts. A close
scrutiny of the central bank balance sheet
indicates regular interventions in the foreign
exchange market. Here are the clues. The
level of deposits of overseas institutions
held at the RBA rose in the three months to
end October 2012. These are custodial
accounts, which appear to be abused to conceal
the activity. Some surmise that the RBA is
printing Australian Dollars and selling them
to overseas central banks for foreign currencies.
It is a sleight of hand easily detected. Fortunately
for the central bankers, most people are too
ignorant to read financial statements. See
the ABC News article (CLICK HERE).

Let's see. A central bank can print money for free, but they deny such activity.
We shall call them liars. They must print
because they can, and no prosecution will
ever come. Heck, the USFed printed up $23
trillion and distributed it to a gaggle of
their banker buddies across the world, so
far with no legal consequence. Without legal
enforcement, no prosecution, not even debate,
the other central banks observe what is happening.
They too print money. They find themselves
in a corner, in need of money. So the Aussies
print money and try to hide their tracks in
the FOREX market with foreign accounts under
their custody, like a mattress next door.
A person with a new credit card, an unlimited
balance, with no requirement to pay back the
borrowed money for purchases, sure, that person
will use it. To claim they never would take
advantage goes contrary to human nature. Thanks
to The Shamrock out of the New
York options trading area for the story.

◄$$$ THE SWISS CENTRAL BANK HAS BEEN A BIG BUYER OF SOUTHERN EUROPEAN
BONDS IN RECENT MONTHS. DESPERATION IS SETTING
IN, AS THEY STRUGGLE TO MAINTAIN THE SWISS
FRANC 120 PEG TO THE EURO CURRENCY. THE SWISS
HAVE A MONUMENTAL PROBLEM IN PROCESSING THE
INFLUX OF FUNDS SEEKING SAFE HAVEN IN THE
YODEL HILLS. THEY MUST INVEST IN EURO-BASED
SECURITIES, OR ELSE LOSE THEIR PURSUED PEG.
EITHER THE PEG GOES AWAY, OR HIGHER RISK RESULTS
ON CONVERSION OF TOXIC BONDS FROM THE SOUTHERN
PERIPHERY TO CORE NATION DEBT. THE SWISS FRANC
CURRENCY WILL EXPLODE HIGHER, ALL IN TIME.
THE PEG CANNOT BE DEFENDED. $$$

The Swiss National Bank is driving down yields for EuroZone sovereign bonds.
The Standard & Poors rating agency has
raised attention to the plight of Switzerland, stuck between a currency rock and
hard bond place. Largely unnoticed, the
Swiss stubborn decision to stem the appreciation
of the Swiss Franc has led to a vast recycling
of funds, a management nightmare. They are
selling off the peripheral debt from Southern Europe, in favor of the stable core nation debt securities.
S&P published some estimated bond purchase
data, noting how the Swiss National Bank (SNB)
does not publish data on such activity. They
estimate the SNB has bought around EUR 80
billion of sovereign bonds issued by the core
EuroZone nations of Germany, France, the Netherlands,
Finland, and Austria during the first seven
months of 2012 alone. Put that figure into
perspective. The Swiss purchase demand
amounts to 48% of the combined full-year deficits
estimated for the entire EuroZone core for
the entire 2012 year, from the five named
nations. Last year in 2011, the SNB purchased
a mere 9% of the core nation debt securities.
That is a 5-fold increase for seven months,
compared to a full last year. The stronger
demand has significantly contributed to the
declining yields on bonds issued by the core
sovereigns during 2012. Arbitrage is alive
and well, even with the hyper-active Euro
Central Bank at work bolstering the peripheral
basket case bonds.

Deposit inflows originating in the EuroZone periphery are clearly being recycled
through the Swiss National Bank into the more
highly rated core Europe
sovereign bonds. The bond yields are on a
strong trend of decline for Germany,
France,
the Netherlands, Finland,
and Austria.
Since the onset of the global financial crisis,
the dynamics of Switzerland's balance of payments
have fundamentally changed. Instead of investing
its large current account surpluses abroad
via purchases of overseas assets, as in the
past before the crisis, the Swiss private
sector has been accumulating savings at home,
motivated by distrust. Domestic demand is
enormous, a new factor. At the same time,
Swiss domestic banks have been reducing their
securities tied to the EuroZone periphery.
To complete the powerful effect, the Swiss
are receiving large inflows of deposits from
nervous foreign investors pursuing safe havens.
The resulting Current Account surpluses has
driven an unprecedented surge in the foreign
exchange reserves held at the Swiss National
Bank. Its volume has grown to 79% of domestic
GDP in mid-2012, from a base 15% of Swiss
GDP in mid-2008. See the Reuters article (CLICK
HERE).

The London Siren adds for proof to the bond market flow of funds argument. The
yield curve tells a story of extreme volume
in movement, evident in the negative yields
in German Bunds, and worse in Swiss Govt Bonds.
It is amazing that the Swiss 10-year is only
0.40% in yield. Their savers are being punished
with no reward. The Swiss short-term is more
negative than the short-term Bund, the most
visible sign of extreme stress.

◄$$$ THE BOSS OF THE LONDON WHALE HAS BEEN SUED BY JPMORGAN IN LONDON. IN A HORRENDOUS DECISION, THE GIANT BANK HAS DECIDED TO FILE
LAWSUIT AGAINST MARTIN-ARTAJO. THE TRADING
RISK WAS TAKEN UNDER THE URGING OF CEO DIMON
HIMSELF. THE TRADES WERE BOUND TO LOSE BIG
MONEY, SINCE HIGHLY RISKY AND TIED TO INTEREST
RATE DERIVATIVES. THE LEVERAGED DAMAGE FROM
PUBLICITY WILL ECLIPSE ANY RECOVERY OF FUNDS,
AND MIGHT BRING SOME HARMFUL EXPOSURE TO INNER
WORKINGS, SUCH AS THE CREATION OF A FALSE
FLIGHT TO SAFETY IN A CONTRIVED USTBOND RALLY.
$$$

JPMorgan Chase has filed lawsuit against the executive responsible for supervising
Bruno Iksil, the trader nicknamed the London
Whale. The case is: JP Morgan Chase &
Co versus Javier Martin-Artajo, High Court
of Justice, Queen's Bench Division, HQ12X04391.
The once celebrated London Whale trader was
a genius for moving the markets until the
Interest Rate Swap leveraged buttresses began
to fall on the JPMorgan chief investment office,
resulting in a $6.2 billion trading loss.
The division was under management by Javier
Martin-Artajo. He is a defendant in a London lawsuit filed October 22nd in pure spite. Both Iksil and Martin-Artajo
have left the bank. CEO Jamie Dimon called
the losses a sign of egregious failures to
manage flawed positions on synthetic credit
securities. Perhaps the greater responsibility
was on Dimon himself, who gave approval for
the entire strategy of controlling the big
markets of derivatives.

Dimon took credit as genius for the corporation during good times, but sued
the office manager when losses occurred. He
is a small man, a mole, a wart on a pig, and
a superstar thief. The estimated size of the
losses had risen through the first nine months
of 2012, and might increase further. Iksil
was allegedly urged to put higher values on
his trades than they would have fetched on
the open market. The defendant asserts no
attempts were made to conceal the losses,
which Dimon surely received regular briefings
on. In its true vindictive manner, JPMorgan
told the financial community that it intends
to claw back the lucrative bonuses given to
Iksil. The former Europe CIO head Achilles
Macris was also responsible for overseeing
the trades.

JPMorgan is facing regulatory scrutiny and criminal probes over the CIO group
trading. It also must defend against US-based
lawsuits from pension funds claiming losses
of $52 million within the elite CIO shop.
Here is where the duplicity comes. The CIO
unit was pushed by Dimon to make bigger and
riskier bets with bank assets in the years
leading up to the losses, according to former
departed employees. The botched bets spawned
management changes and dismissals, as others
were career victims. The Chief Investment
Officer Ina Drew retired four days after the
loss was disclosed on May 10th. Barry Zubrow
had overseen the JPMorgan risk management
function during the period. He will retire
at the end of this year. See the Bloomberg
article (CLICK HERE).
Look for gradual exposure of the inner workings
of the managed Interest Rate Swap contracts,
which produced a phony flight to safety in
USTreasury Bonds. The big loser might be JPMorgan,
which is doubling down with an attendant risks
of much worse harmful exposure that could
put the USTBond market in very dubious light.

◄$$$ U.B.S. SEEKS TO CUT 10 THOUSAND JOBS IN THE SWISS BANKING SECTOR.
THE BANK IS UNDER SIEGE FOLLOWING THE OUTSIZED
SUBPRIME MORTGAGE LOSSES AND THE CURRENCY
TRADING SCANDAL LAST YEAR. IN THAT TRADING
FIASCO, U.B.S. FORFEITED ITS ENTIRE GOLD ACCOUNT,
100% OF IT. THE SEVERITY OF THE CORPORATE
CUTBACKS IS CONSISTENT WITH THE JACKASS CLAIM
THAT U.B.S. IS A RUINED DEAD BANK. $$$

The embattled Swiss bank UBS announced up to 10,000 eliminated jobs as it made
deep cuts to its investment banking operations,
more so its fixed income business. A radical
restructuring is underway. Some observers
regard a transformational change for UBS is
in progress. More like an undertaker preparation
of the embalming process. The plan appears
to make cost cuts at the margin, to increase
the capital ratios, and to return more capital
to shareholders. The UBS cuts are piled atop
the 50 to 60 thousand already executed in
the financial sector. The domestic rival Credit
Suisse also announced it was also making more
cost cuts. A domino effect is expected, as
further industry restructuring could come.
The poor quarterly results prompted reaction
with some accelerating plans.

A savvy eye noted that UBS is taking actions to return its investment banking
to the historic core franchise under Warburg.
In 1995, UBS bought SG Warburg, a British
merchant bank. The UBS bank is a mess. It
racked up $50 billion in subprime mortgage
bond losses in 2008, prompting a Swiss government
bailout. In early 2011, UBS was stung by a
trading scandal that it lied about publicly.
It lost its legs with huge VP-approved
trading losses, blamed it on a rogue trader,
ruined his career, which resulted in the bank
forfeiting 100% of its gold bullion account.
My solid gold trader source was part of the
process that gutted UBS entirely, a witness
with his own hands and eyes. He knows of the
lies, the VP approvals, and the fully depleted
gold account.

Watch the death process play out. The UBS work force was 63,520 in staff at
end June. The massive cuts come on top of
3500 job losses announced last year. See the
Fox Business article (CLICK HERE).
To celebrate their funeral, the UBS bankers
went to the pubs in London, after being turned away at the office. The
action reeks of protecting harmful information
that might be made public by angry disgruntled
employees who know too much and might wish
to deliver some evidence to an eager cub reporter,
the incriminating type. See the UK Telegraph
article (CLICK HERE).
My contact in Zurich,
an employee among their banks, pitched in
with some comments. He said the cuts consist
of 16% of the UBS work force. The fixed income
staff was slashed. The job cuts are occurring
across the entire industry in all major Swiss
cities. He called it a disaster, with no job
deemed safe. The implosion appears to have
begun in the Swiss financial system. Perhaps
when the implosion is farther along, the authorities
will have an impossible time keeping the lid
on the Allocated Gold account class action
lawsuits. A well informed contact added some
past perspective, with light shed on their
history. UBS used to be a very small bank.
But they were ambitious and without scruples.
They were the only Swiss bank that would lower
themselves to handle the nazi loot post in
post-WW2 times. They built their business
of stolen holocaust money, some dirty roots.
May UBS collapse, but not before any innocent
analysts and traders find new posts elsewhere.
May they drag down the bigger Swiss bankers
who stole allocated gold accounts.

Tyler Durden pitched in with a funeral speech. It was not a eulogy, since full
disrespect was shown for the rotting corpse.
He wrote, "There is down-sizing; there
is trimming the fat; and then there is UBS.
The once giant Swiss Bank just announced it
will cut up to 10,000 jobs. This comes on
top of the 3500 from last year, which makes
a rather dramatic weight loss strategy for
the 63,500 employee firm. As the Financial
Times reports, they will not happen all at
once, but will lead to the closure of a sizable
part of the UBS fixed income trading operations
(and other capital intensive areas of the
investment bank). Perhaps in the understatement
of the day: 'THERE WERE SEVERAL OPTIONS ON
THE TABLE BUT UBS HAS DECIDED ON THE MOST
RADICAL ONE,' a person familiar commented
as the plan is hoped to reduce complexity
and costs. So no more Bloomberg Terminals?"
To be removed from the corporate offices will
be the fixed income trading operations and
other capital intensive areas of the investment
bank. When capital is gone, certain business
segments that depend upon capital base must
depart. UBS is dead, my allegation for 18
months. See the Zero Hedge article (CLICK
HERE).

◄$$$ THE BANK OF ENGLAND CAN BE SEEN USING
DEVIOUS METHODS TO CONCEAL ITS DIRECT MONETIZATION
OF UKGOVT DEBT. THEY ARE PROTECTING THE AAA
DEBT RATING. CREDIBILITY AT THE B.O.E. IS
ERODING FAST, AS ALL MAJOR CENTRAL BANKS ARE
BOTH DECEPTIVE AND INFLATION MACHINES. $$$

Credit to the London Siren for an excellent insight into the devious workings
of the Bank of England. He works in the fixed
income arena inside the London
belly of the beast. The following are his
thoughts, with my edits. The UK AAA sovereign
debt rating is under pressure. In order to
alleviate the pressure in the short term,
the BOE and the Treasury conducted a massive
fudge. The BOE received coupon payments on
UKGilts it holds, but transferred them back
to the Treasury. This transfer was roughly
equivalent to 1% of GDP and was meant to provide
visible evidence that austerity was indeed
working well, and that the debt/GDP ratio
was on target. This is nonsensical accounting
replete with deception. However, it demonstrates
convincingly the practice a DIRECT monetization
of debt by the Treasury. The implication from
this action is that the BOE is no longer independent
and is explicitly aiding and abetting fiscal
policy in a reckless manner, which in
fact reflects similar reckless action by the
USFed and Euro Central Bank. The credibility
of the BOE is lost. It has become a Weimar engine, just like the USFed and EuroCB.

In the continuing theme of bad UKGovt judgment, a quick update on its horrendous
investment in corrupt broken banks. The Financial
Times reported that the Public Accounts Committee
(spending watchdog for Parliament) is not
convinced that the government will be able
to sell its stakes in the big rescued banks
for the price it paid any time soon. In
addition, the accounts committee report cites
the 66 billion Pounds cash spent purchasing
shares in RBS and Lloyds may never be recovered.
The report comes just weeks after Jim O'Neil,
CEO of UKFI (which controls the stakes in
RBS and Lloyds) admitted that a sale was not
imminent, and both firms remain in trouble.
The cost of liquidation for the two firms
would have been much less, but would have
revealed massive bank corruption in the post-mortem.

◄$$$ LONDON FRETS ITS FUTURE AS FINANCIAL HUB WITHIN
EUROPE. INSOLVENCY AND
CORRUPTION COMBINE WITH A UKECONOMY IN DEEP
DECLINE TO CREATE HORRENDOUS CONDITIONS FOR
THE BIG CITY BANKS. BY STEPPING ASIDE FROM
THE LONG SHADOW OF EUROPEAN BANK UNION, LONDON
HAS RISKED SOME ISOLATION. IT WILL STILL BE
A BIG BANKING CENTER, AS ETCHED IN THE THE PAST 500
YEARS OF HISTORY. CHANGES WILL COME TO THE
FOREX MARKET ACTIVITY, DIRECT E.S.M. FUND
BAILOUTS, AND LONDON INFLUENCE ON BANKING RULES. THE EUROPEAN FINANCIAL CORE IS PULLING
TOGETHER EVEN AS IT IMPLODES. $$$

London might not remain the premier bank
center in the world much longer. The City
has risked some isolation as a result of its
boycott of the European Bank Union power play.
The European Central Bank will become the
main regulator for the biggest banks in the
17-nation EuroZone as early as January 1st,
the first step toward creating a banking union.
So the LIBOR scandal is followed by EU bank
separation. Britain's
voice in setting the agenda will be muted
as the EuroCB gains new powers. The United
Kingdom wishes to avoid
the deep responsibility to fund failed banks
in Spain, Italy,
and France.
Deputy Prime Minister Nick Clegg put it clearly
in October, when he stated that Britain
should stay outside because the plan for the
bank union is designed to address the vicious
circle between sovereign debt and banks in
those countries. Furthermore, trading in Euro
currency could shift to Frankfurt or Paris and be regulated by the EuroCB. Such is the claim of Thomas Huertas,
the former UK member on the European Banking Authority, now
working at Ernst & Young. That function
is currently centered in London.
Big changes come to London.

London remains a giant in banking, with
no equal. But expect a move toward more decentralization
as Europe implodes. The
strengths are many. London
boasts of the world's biggest center for FOREX
trading, cross-border bank lending, and interest
rate derivati ves. The City has 251 foreign
banks and more international firms than any
other financial center including New York or Frankfurt. The City is home to
75% of the FOREX trading done by European
Union firms, including 42% of all Euro currency
trades. Banks located in London conduct 62% of trading in Euro-based OTC interest rate derivatives.
A European banking union that gives the EuroCB
new supervisory powers will create an inner
core, which will remove London from decisions as well as Southern Europe,
where the rot is worst. The union will be
less sensitive to the concerns of London
precisely when the Southern Europe sovereign
bond losses pile up, with London banks sitting as creditors. Next comes a serious undermine of
the single market, which might actually be
good, but less efficient. The function
of the European Stability Mechanism is likely
also to become altered. A central supervisory
authority could permit the ESM bailout fund
to hold EUR 500 billion for directly recapitalization
of firms, removing the link between sovereigns
and their lenders. See the Bloomberg article
(CLICK HERE).
London is slowly separating
from Europe, precisely when the LIBOR bank scandal has caused distrust and
rival attacks continue.

◄$$$ BAILOUTS ARE GOING TOWARD MONEY LAUNDERING EFFORTS. CYPRUS IS A PRIMARY HAVEN FOR THE EUROPEAN DIRTY
MONEY. ACROSS THE ATLANTIC, NEW YORK CITY IS THE BOLDER HAVEN FOR DIRTY MONEY. HOWEVER, CYPRUS
HAS A NEW DISTINCTION IN PARKING OTHER ILL-GOTTEN
MONEY OBTAINED FROM EUROPEAN BAILOUTS. $$$

A sizeable portion of bank and bond bailouts is finding its way to Cyprus.
The world is being robbed, nothing new about
that. The main difference is that the dirty
money is not going entirely to London
and New York, but rather
to tiny Cyprus. A report prepared
by the German intelligence agency Bundesnachrichtendienst
(BND) on money laundering in Cyprus
has laid out the details and data. Their flagship
journal Spiegel reported that the BND discovered
Russian oligarchs, individual entrepreneurs,
and mafiosi have profited most from the hundreds
of billions in European taxpayer funds. They
have parked their illegal earnings for the
most part in Cyprus. See the InCyprus article (CLICK HERE)
and the Investment Watchdog article (CLICK
HERE).
The United Nations will be busy updating their
money laundering reports published in 2009
and 2010, in which they identify the New York money center banks as being the dirtiest in the world for
processing narcotics funds. The biggest violations
will always be with New
York and London banks.

## JAPAN SEES BAD MOON RISING

◄$$$ THE JAPANESE ECONOMY IS AT GRAND RISK. NO LONG-TERM BENEFIT FROM
ANY TSUNAMI OR NUKE PLANT RECONSTRUCTION ARRIVED,
ONLY BURDEN WITH HEADWINDS. JAPAN FACES RISK OF IMPLOSION. THE JAPANESE ECONOMY
SHRANK THE MOST SINCE THE 2011 NATURAL DISASTER.
THE CONTRACTION ADDS PRESSURE ON THE NODA
ADMIN AND THE CENTRAL BANK. THIS IS NOT THE
TIME TO IMPOSE A HIGHER SALES TAX. TWO DECADES
OF MONETARY EASING HAVE SOLVED NOTHING. JAPAN IS SINKING. $$$

The Japanese miracle is coming to an end, victim of a combination of the Chinese
ascendance and the rotten global economy,
together with the earthquake, tsunami, and
nuke plant devastation. The Japanese have
been outsourcing a significant portion of
their production to China. At the same time, the
demand from Western economies has fallen off.
In 3Q2012, the Japanese Economy declined as
exports tumbled and consumer spending slumped.
The Tokyo
leaders responded the way they usually have
done for over 20 years. They leaned on their
central bank to add stimulus, in the form
of more bond monetization. Unlike in the US,
where economic statistics are doctored to
absurd levels, Japan tells the tough story. Their Gross Domestic
Product fell in Q3 by an annualized 3.5%,
the most since the earthquake and tsunami
struck in early 2011. On a quarterly sequential
basis, the economy shrank 0.9% in the July
to September period.

Shipments to Asia, Europe, and the United States all went into
reverse, along with capital spending. As Japan faces the risk of its
third officially recognized recession since
2008, the effect dampens plans by Prime
Minister Yoshihiko Noda to implement its national
first sales tax increase in more than a decade.
At the same time, a political stalemate has
occurred, leaving the government with empty
cash barrels. The clash with China has finally shown a
negative impact. Exports to China have been undermined by anti-Japanese sentiment,
following the Noda Admin purchase of islands
under disputed ownership. At risk is a group
of islands, along with off-shore oil &
gas rights.

Private consumption across Japan posted the first quarterly
back-to-back decline since the six months
through March 2009. The government subsidies
for fuel efficient cars has been curtailed.
Capital investment dropped 3.2%, the steepest
decline since 2Q2009, a horrible indicator
for the near future. The Japanese Govt
debt is the highest in the world, on a debt
ratio to GDP basis. The recent legislation
passed in August to increase the sales tax
to 8% in April 2014, and then to 10% in 2015,
comes precisely when the economy is faltering.
Expect an acceleration in the decline, especially
if the sales tax is imposed. An adjustment
is in progress for the Jap Govt Bond, which
actively discounts a tax rise in 2014. The
JGBond market could quickly become destabilized.
The buyer of last resort is again the Bank
of Japan, which expanded its asset purchase
program for the second time in two months
on October 30th. Their QE is permanent and
large. The BOJ under Governor Masaaki Shirakawa
is fast becoming a travesty clown show. They
announce yet another new QE program every
few months, trapped in the ZIRP (zero percent
interest rate policy) monetary corner for
22 years. The United States is learning
about the same 0% corner, stuck on monetary
policy precisely as the Jackass forecasted
in May 2009. But the US
plight is much worse than Japan's,
since its trade gap has two decades of punch
from capital hemmorhage. The US is a shell of an industrial
economy by comparison.

The Bank of Japan is extremely concerned about the USFed and
its renewed amplified QE bond purchase program.
It will work to weaken the USDollar, thus
rendering harm to Japanese industry. The American monetary expansion risks
pushing up the Yen exchange rate. In the crossfire
lies the armada of powerful Japanese industrial
firms and their keiretsus (conglomerates).
A higher Yen currency would conspire to make
Japanese exports less competitive since more
costly in the global marketplace. Japanese
companies have been badly hurt by the worsening
economy. Bloomberg data shows an aggregate
31% decline in net income for 191 companies
listed on the Nikkei 225 Stock Average which
reported earnings last week for the completed
third quarter. That is 85% of their leading
firms. Panic is setting in.

Corporate losses are impressive and never seen before, causing shock and dismay.
Sharp Corp and Panasonic Corp expect to lose
a combined 1.2 trillion yen (=US$15 billion)
this fiscal year. Hitachi Construction Machinery
and Nissan Motor cut their full year profit
forecasts. Several other big firms outside
of the industrial sector are in trouble, some
on the ropes. Machinery orders, an indicator
of capital spending, fell the most in four
months in September, while industrial production
fell by 10%, the most since the earthquake
slammed the export trade. Net exports,
equal to shipments less imports, subtracted
0.7% from GDP on a quarterly basis, the largest
decline in three quarters. Public investment
rose 4% in the period, the third quarter of
growth. The GDP deflator, a measure of price
changes across the economy, fell 0.7% last
quarter from the same period of 2011. See
the Bloomberg article (CLICK HERE).

◄$$$ THE JAPANESE MIRACLE HAS TURNED TO NIGHTMARE, AS THE TRADE SURPLUS
IS GONE (ANOTHER CORRECT JACKASS FORECAST).
THE TRADE DEFICIT IS BIG AND GROWING RAPIDLY,
MADE WORSE BY THE CHINESE TENSIONS. THE JAPANESE
CAPITAL POOL IS AT RISK, BEING USURPED BY
THE GROWING DEFICIT. $$$

Two features permitted Japan to internalize over
30 years of reckless failed fiscal (govt debt)
and monetary policy (bond purchases) and to
offset the relentless deflationary downward
spiral. A) Its demographics coupled with an
investing culture that favors deposits and
bonds over equities, which resulted in massive
government bond investments. B) Its trade
surplus which led to positive foreign capital
flows. Both demographic and trade factors
have suddenly gone into reverse. The nation
of Japan
has reached its demographic limit. Evidence
confirms the net sale of pension funds, as
in selling JGBonds to meet redemption needs.
Worse, to find yield income, they are being
enticed (forced) into risky assets in order
to generate a return at any cost. So the demand
with funds in hand has gone away, and dumb
risk is being adopted. They are repeating
the US errors of chasing yield in mortgage bonds.
Losses are dead ahead.

The Fukishima earthquake and tsunami surely wrecked havoc. The reconstruction
was touted as potentially positive, but the
nuke plants are still not stable, a story
suppressed. Following the harmful effects
of Chinese tension, the Japanese trade surplus
status in recent weeks has turned into a sea
of red ink. It has gone into deficit, and
rapidly so. Like their American counterparts,
the only source of capital left is BOJ monetization
of the most acidic kind. A footnote reads
that the central bank has failed in all eight
iterations of Quantitative Easing. No
recovery happened. USA
take note. Unfortunately for Japan,
the nation already sports a national debt
equal to 220% of GDP. The over-arching risk
has turned much more dangerous and ominous,
a potential for rising interest rates. Even
the smallest increase in prevailing interest
rates would result in the entire Japanese
house of cards toppling. They have been geared
to the 0% lunacy for over two decades. The
longer the timespan geared to artificial free
money low rates, the more sweeping and deep
the damage if rates were to rise. In Japan
a bad moon is rising.

The Asian juggernaut is in trouble. The nation's export trade sector is not
languishing, but rather enduring a remarkable
collapse. In one year's time, the world will
see something more obvious off kilter in Japan.
The entire Asian export trade sector is in
trouble also. Call it the toxic mix of the
political fallout with China
and regional Asian weakness. The former seems
crazy exaggerated, the latter from Western
demand in decline. Check out the similar duress
evident in Singapore, with annual industrial production estimated
at 2.5%, and note Thailand
manufacturing output off 13.7% annually, and
observe the Philippines whose exports
are down by 9% annually. The leader Japan, with the third largest economy in the world,
has been brought to its knees. A record
trade deficit of close to JPY 1 trillion (=US$12.2
bn) in Japan was registered last month in September.
At risk is the viability of the capital pool
from a powerful restriction. It is being gobbled
up by the deficit. The trade deficit is growing,
having moved from a $6 billion per month range
held over the last year to twice that level
in the most recent month. See the Zero Hedge
article (CLICK HERE).

◄$$$ JAPAN HAS RECORDED A CURRENT
ACCOUNT SURPLUS ATOP A TRADE DEFICIT. THE
INVESTMENTS MUST HAVE BEEN ENORMOUS. ASIAN
RESERVES FROM SEVERAL COUNTRIES ARE HUNKERING
INTO THE JAPANESE GOVT BONDS, SINCE THEY SHUN
THE USTREASURY BONDS. THE ASIANS RECOGNIZE
THE TOXIC MONETARY CLIMATE WITHIN THE UNITED
STATES FROM THE ENTRENCHED BOND MONETIZATION
CANCER. $$$

Japan posted a Current Account surplus
of JPY 503.6 billion (=US$6.14 bn) in September,
according to its Ministry of Finance. Two
points worthy of note. The trade deficit has
been ovecome by regional Asian investment,
which seeks to find safe haven, but moves
away from USTBonds regarded as increasingly
toxic. Secondly, The Current Account surplus
is trending down from a year ago. Although
the C/A surplus is up slightly from the JPY
454.7 billion logged in August,the
headline C/A figure was down 68.7% from a
year ago. See the INO news article (CLICK
HERE).

##
FRANCE & SPAIN REACH CRITICAL PHASE

◄$$$ EUROZONE CRISIS HAS THREE FULL YEARS OF PAIN, AND NOTHING SOLVED.
THE FIASCO IN FRANCE MOVES ALONG FULL SPEED,
WITH THE IMPLOSION ACCELERATING. THE FRENCH
PROPERTY MARKET WILL LEAD THE PATH DOWN LIKE
A GIANT MILLSTONE, RENDERING CALAMITOUS DAMAGE
TO THE BIG BANKS. IT SHOULD PROVIDE A FORWARD
GLIMPSE OF THE AMERICAN DISASTER AS IT LURCHES
INTO SOCIALISM IN FULL EMBRACED GLORY. A SHRINKING
ECONOMY, HIGHER TAXES, AND WIDER BENEFITS
OFFERS A PLAIN PRESCRIPTION FOR RUIN. FRANCE WILL SERVE AS A SHOWCASE
NATION OF FAILURE. IT WILL JOIN THE WRECKED
P.I.I.G.S. NATIONS. $$$

Scanning the world comparatively, France ranks near the top
in government transfers to households, near
the top in vacation times, and near the top
in labor market inflexibility. It ranks near
the bottom in hours worked per week and labor
force participation rates. They permit the
youngest retirement age in Europe.
Being the worker utopia is costly. Its welfare
state stands head & shoulders above the
rest in cost to maintain. A quick look at
several key indicators shows the decline in
almost all categories since Hollande took
office to deliver the final socialist elixir.
It is not a solution, but rather a national
dose of hemlock. Notice PMI (manufacturing
index), business confidence, export growth,
and job seekers (reversed) presented on melded
scales. The profound national decline is exactly
what the Jackass forecasted several months
ago. In France, absolutely
nothing fixed, resolved, or properly addressed,
nothing, but that is what socialism is all
about. Solve nothing, share the pain evenly.
Handouts, welfare, guarantees, the good life
for everyone, such promises being what France lacks the wealth to
provide. See the UK Guardian article (CLICK
HERE).

A French-born subscriber living in New York City recently returned from France. He has demonstrated
a sharp mind over the several years of loyal
subscription, during email exchanges. He shared
some observations of value. The following
are his thoughts, with minor edits. Two key
impressions stuck from the trip. Gold controls
are in place on sales. It is now illegal to
transact for purchases of Gold or Silver in
cash. Sales are only permitted with credit
cards, which enables the French Govt to track
the transactions. People are responding easily
by making the short trip to Belgium,
where the black market is florishing. In many
locations, the same language is shared. Secondly,
the French banks are ruined, in dreadful condition.
They are the largest holders of Greek debt.
Moreover, the real estate bubble has busted,
the market head down fast. Some analysts expect
a complete and utter massacre. It has started
and nothing can stop it. No transactions are
taking place, the property market locked and
falling, stuck frozen without bids. The worst
damage is in city center Paris and metropolitan
Paris, which contains 20% of the nation's
population. Metro Paris
is also the richest part of the country. The
damage coming to the balance sheet of their
entire collection of banks will be huge. By
the next time he makes the trip to Paris,
the devastation will be stark and emphatic
by easy comparison.

◄$$$ STANDARD & POORS DOWNGRADED THE FRENCH BANKS AGAIN. THE PROCESS
WILL HAPPEN LIKE AN ENDLESS CASCADE. AS THE
SOUTHERN EUROPE PERIPHERY
GOES INTO THE TOILET, SO GOES THE BIG FRENCH
BANKS. THEY SERVE AS A PRIMARY LENDER TO SEVERAL
NATIONS, FAR MORE AMBITIOUS IN CREDIT EXTENSION
THAN THEIR MODERATE WEALTH AS A NATION SHOULD
PERMIT. $$$

Credit rating agency Standard & Poors cut its ratings on BNP Paribas and
two other major French banks. The impetus
again is rising economic risks. The downgrade
also cut the ratings for Banque Solfea and
Cofidis. The official statement read, "We
see [these banks] as more exposed to this
more difficult European environment. In our
view, the economic risks under which French
banks operate are increasing, leaving them
moderately more exposed to the potential of
a more protracted recession in the EuroZone."
Expect further debt downgrades to hit
the French banking system in coming months
like a flurry of severe kicks to the gut and
face to a man already on the ground. The
consequence is felt immediately with investment
funds like pensions which are forbidden to
invest unless of investment grade. The S&P
agency changed the outlook on 11 other major
banks to negative from stable, leaving the
door open for future downgrades sooner rather
than later. That group with reduced outlook
included Societe Generale, Credit Agricole,
and Allianz Banque. The first two are flagship
giants along with BNP Paribas, already downgraded.
As these three banks, so goes the French banking
system.

France is facing an economy in sudden freeze,
facing imminent decline. It is the second
largest economy in the European Union behind
Germany. Although in better shape than Spain
or Italy, its equally sized neighbors, France stands out since it serves as a major creditor
for the entire Southern
Europe periphery. Thus it is badly weighed
down. The big French banks are lined up for
staggering losses yet to be realized, but
unavoidable. The Euro Central Bank under Draghi
is doing a delicate balancing act that appears
more like a shell game of scaled worthless
toxic paper to replace older standard toxic
paper in exotic hokus pokus manner. The French
GDP is unchanged since 3Q2011. Many nations
in Europe are now mired in recession. In addition, the French unemployment
rate in August was 10.6%, only slightly better
than the 11.4% rate across the EuroZone.

Many people believe Europe needs a banking union. The global and European banking system
is interwoven. Problems encountered in Spain, Italy,
and Greece
can affect the outlook for banks in other
countries, expecially France
and London
(their major creditors). In mid-October, the
European leaders agreed to a EU-wide banking
supervisor to begin work in 2013. A new
turkey leader czar is not needed. They must
liquidate the insolvent banks and clean out
the rot, like done in Spain.
It is a highly disruptive but urgently necessary
process. For the same reason as in the United
States, this will not
be permitted to happen. The banker elite does
not want to suffer losses. They wish instead
to continue to receive multi-$billion welfare
in the form of rosy bond redemptions and direct
handouts. They do not wish to shed power during
a vast liquidation. See the CNN Money News
article (CLICK HERE).

◄$$$ SPAIN HAS CREATED THE BAD
BANK FINALLY, AS REALITY STRIKES HARD. THE
FINANCIAL GARBAGE CAN HAS BEEN CREATED. FOR
ALMOST FIVE YEARS RUNNING, THE SPANISH BANKING
SYSTEM HAS NOT PROPERLY CONDUCTED ACCOUNTING
FOR THE PROPERTY MARKET. FINALLY, IT COMES
AND AN FLOOD OF RED INK FLOWS. A CASE OF SYSTEMIC
SHOCK IS NEXT WHICH THREATENS TO CAUSE SYSTEMIC
FAILURE FOR THE NATION. $$$

The Spanish Bad Bank emerges, and two impressions are clear. The national
real estate market in all of Spain is an absolute disaster,
an order of magnitude worse than perceived.
The accounting delays have created a travesty,
extended since 2005 as a norm in practice.
The nation took Extend & Pretend on bank
asset markings to obscene heights in a global
spectacle easily observed and publicized,
with outcome foreseen. They have devised
a public garbage can where the rules and spin
are loaded with pure delusion. It is almost
a comedy worthy of laughter. The Bad Bank
enables the broad application in bank asset
writedowns. The delusion has many sides. The
Spanish Govt actually believes the process
can be orderly. They believe the Bad Bank
will not produce losses to the public account.
They believe it will operate under a goal
of profitability. They believe buyers will
appear in the liquidation. Their break from
reality could be judged psychotic. The cleanup
will be brutal, as seen in the planned haircuts,
the loose term meant to describe the declared
asset loss to the creditor (banks). The price
guidelines for liquidation are the result
of some market activity.

The Spanish Govt expects even with massive discounts, the property will move
in the liquidation arena. The initial results
and indications are not promising. The de-leveraging
process has gone NO BID so far. The discount
on property loans is set for 46% in writedowns.
The discount for foreclosed assets is set
for 63% in writedowns. The discount for land
is set between 56% and 80% incredibly. The
investor reaction from the banks in line to
suffer the writedown losses will come soon,
expected to be filled with shock and grim
faces. Expect some public outcry, but such
is the consequence of at least six years of
accounting delays bordering on criminal to
the investors. What comes would have been
much less severe but perhaps manageable and
orderly if done four or five years ago. But
delays in bank accounting will result in a
catastrophe several times worse than what
would have occurred in controlled liquidations,
say in 2007 or 2008 or 2009. It will next
be several times worse, enough to cause a
systemic free lockup from the powerful shock.
Refer to shock to the financial structure,
businesses, and the people, with certain chaos
and disorder.

Prepare for book value on bank portfolios to come way down. The following graph
indicates the minimum writedowns for a host
of property assets, derived from auction activity.
Up to the listed percentages, no bid is seen
on the given Spanish assets. In other words,
nobody will bid on Foreclosed
Land at even an 80%
haircut, and the fair value of New Housing
is at 46% of book value. The condition
of Spanish real estate is an absolute catastrophe,
the final reckoning that the Jackass described
in 2005 and 2006 and every year afterwards.
The writedowns might be worse than expected
by this analyst, who is not known to put forward
a timid forecast. The longer the delay, the
bigger the writedowns, as reality strikes.
The Bad Bank implicit haircuts have confirmed
the utter calamity. The nation will enter
a depression and possibly a systemic failure
situation from the prevalent shock. Haircut
details as per the below table:

The reader should be clear on the strategy attempted, or at least planned. The
leadership crew in Spain wants its banks to
default on its assets, without actually going
through the default process, have the discounted
liability be transferred to a third party,
and then not have this third party's debt
be counted against the debt of the country.
Witness Alice
in Wonderland where all the masters are Cheshire
Cats, but rabbit holes are everywhere. A comparable
analogy would see someone defaulting on a
mortgage, keeping the house, no loss marked
on personal accounts, with the default not
counting against their credit rating. The
full boat is a massive load. Spain is in
possession of EUR 180 billion in bad loans,
a figure that rises every month. Even
a blended 50% haircut writedown applied to
the assorted national property stock will
not cover the existing collection of bad loans,
expected to grow and surpass EUR 200 billion.
The figure will soar much higher, since other
properties will come forward to enter the
meat grinder of reality. Also, since the EU
economy is caught in quicksand, future losses
will come as the market continues in decline,
dragged down by a broken sovereign bond market.

The current Bad Bank iteration attempt will in time be
deemed inadequate as a concept, since badly
flawed in its rules and guidelines for proceeding.
Usually the entire concept is a cowardly attempt to sidestep the reality of
bank writedowns, or to saddle the losses with
an imaginary national uncle, or both. If Spain only had its own Fannie Mae!! Watch the
gratuitous timeline and its upcoming extensions
for the final break from reality. Spain
will become Greece
five times larger in a tragic comedy, enough
to capture global attention and scare the
hell out the entire Western world. It will
be seen as a future glimpse for other nations
in need of resolution. The United States is
Spain times 20 or 30, since
the derivatives amplify the destruction during
liquidation. See the Zero Hedge article (CLICK
HERE).
A footnote, that the Spanish elite do not
seem prominent enough to stop the process.
Their power base will wash away. For some
reason, the Latin culture does not lock in
power through the big banks. Spain will
provide a window to the entire Western world
on how wealth has been an illusion for decades,
since the monetary system divorced itself
from Gold.

◄$$$ BANKSIA HAS BEEN SENT TO RECEIVERSHIP IN THE SPANISH BANKING SYSTEM,
JUST MONTHS AFTER BEING BAILED OUT, AND ONE
MONTH AFTER BEING GIVEN A QUASI CLEAN BILL
OF HEALTH. THE FARCE CONTINUES WITH A MAIN
ACT. $$$

Auditors gave Banksia Securities a tailored clean bill
of health less than four weeks before its
collapse in the last week of October. Legions of investors are stuck in limbo, unclear of the value of EUR 660 million
in investments, as the financial firm fell
into receivership. Amazingly, on September
27th, accountants signed off on accounts that
found no significant changes in the state
of affairs during the year, in their words.
Either they are incompetent, ordered to falsify,
or paid off in bribes. The company's 2012
full year accounts by the chartered accountants
Richmond Sinnott & Delahunty in Bendigo stated, "No matters or circumstances have arisen since
the end of the financial year which significantly
affected or may significantly affect the operations
of the company." What a relief! Three
weeks ago, reality struck. The receivers McGrath
Nicol were called in to manage the mess and
sort out the garbage. Spain
once again finds itself on stage amidst a
jeering crowd. See the SMH article (CLICK
HERE).

◄$$$ A SWEEPING DUTCH DEBT DOWNGRADE ON THEIR BANKS SERVES AS A REMINDER
THAT THE EUROPEAN CORE HAS SOME CRITICAL WEAKNESS
ALONG WITH THE SOUTHERN PERIPHERY. IMPLICATIONS
WILL COME IN FORM OF MORE COLLATERAL TO POST
FOR BANKS, FINANCIAL FIRMS, AND INDIVIDUALS.
IN ADDITION TO THE ECONOMY, THE DUTCH HOUSING
MARKET WAS CITED FOR ITS PROLONGED CORRECTION.
$$$

Standard & Poors downgraded a group of Dutch banks, due to economic downturn
risk and continued housing market prolonged
correction. They cited wider EuroZone risk
as well. The Dutch property bubble has not
received much attention, which has some similarities
to the US
subprime flaws. S&P lowered by one notch
the ratings on ABN AMRO Bank, Rabobank Nederland,
van Lanschot Bankiers, and the SNS REAAL group.
The outlook on the SNS REAAL group is reduced
to negative, while the outlook on the other
firms is stable. They revised the outlook
on ING Bank, ING Groep, and Achmea Hypotheekbank
to negative. They placed on CreditWatch negative
the long-term ratings on Bank Nederlandse
Gemeenten, KAS Bank, and Nederlandse Waterschapsbank.
The impact of higher economic risks will be
reviewed. They maintain the ratings on NIBC
Bank as negative.

In their statement, Standard & Poors wrote, "Furthermore, we consider
that the prolonged housing market slump, elevated
household leverage, and measures to reduce
the budget deficit are constraining consumer
confidence and private sector activity in
general. We anticipate that the impact of
these constraints could lead to moderately
higher impairment charges among Dutch banks
over the next two years." The implications
are clear. Notice that budget reduction (often
poison pills) is mentioned as a risk, implying
even steps toward solutions are harmful. The
Dutch Govt debt AAA rating could come under
pressure, which is already on negative outlook
by Moodys and S&P. The Euro currency takes
one more small but notable step toward implosion.
As always, the downgrades mean more margin
posting and need for more collateral by investors.

◄$$$ BRITISH CONCERN GROWS OVER AN EXIT FROM THE EURO COMMON CURRENCY.
THE NATION COULD RESORT TO A REFERENDUM ON
DEPARTURE FROM THE ECONOMIC BLOC ENTIRELY.
THE TABLES HAVE TURNED IN THE LAST 70 YEARS,
VIS-A-VIS FASCISM, NAZISM, AND CAPITALISM.
FORMER NAZI GERMANY LOOKS EAST WHILE NEO-NAZI BRITAIN CONSIDERS ISOLATION.
A TWO-TIERED EUROPE THREATENS TO REMOVE LONDON FROM ITS DOMINANT POSITION IN FINANCE. $$$

The nations of Europe are engaged in pronouncements of
national pride as the continent continues
to implode. The leaders of Germany,
France, and Italy
spoke of their pride, but in Great
Britain a strange silence
prevailed. In the balance is a potential
referendum on Britain's relations with the European Union.
A news source reported recently that a senior
cabinet minister wants Britain
to threaten openly to leave the 27-nation
economic bloc. There was no official denial
of the report, which means it might have some
validity. Britain could be laying plans
for what political and financial pundits have
dubbed Brixit, a variant on Grexit, used to
refer to the Greek departure from the EuroZone.
The single economic and free trade market
of Europe accounts for
half of the British foreign trade and investment.
The nation has always been ambivalent about
the European project.

Unlike the founding six nations of the European Union, Britain
was a victor in World War II alongside the
United States, while all six EU nations were either
defeated or occupied. The tables have turned,
as the Allies (US & UK)
have been converted into nazi nations dominated
by ruthless Syndicates linked fatally to the
security agencies in the Jackass opinion,
not stated humbly but rather with full conviction
and a slight contempt. Personal threats with
curt commentary confirm the validity of this
viewpoint. Britain
once stood alone in Europe
against fascism, but now finds itself a nazi
nation led by corrupt devious bankers, separating
itself from the Europeans. The capitalism
core is formed way east of Europe in Russia and China,
organized in commerce by Germany
in a major twist, a paradigm shift. The former
nazis of Germany migrated to London
and New
York to plant roots that blossomed in the
last two decades. The New Germany looks east
to organize, establish, and fortify the next
chapter for the financial world platform with
Gold playing a key role. What irony! The aspect
unchanged is that nazis operate with paper
money but steal the gold.

The emergence of a more distinct two-tier Europe is putting
great strain on Europe's
unified economic sphere. The deep integration among the 17-nation EuroZone on issues like banking and
financial services could ultimately threaten
London's
status as the European financial capital.
Sebastian Dullien summarized well the situation
for the European Council on Foreign Relations.
He wrote, "Deeper integration in the
core would come with disintegration in the
EU's periphery and shrink the single market."
In other words, integration could undermine
the one part of the European bargain that
Britons actually seem to like, the dominance
of London in finance. See the New York Times article (CLICK HERE).
The stamp of finality to the descendence of
London could be validated by the removal of its gold, a process that
accelerated this spring and summer. Its gold
has been delivered to the East in gigantic
volume. With the gold goes power for the next
chapter. Britain will become a bit
player. The United
States will become a
ravaged violent land with a fusion of marxism
and nazism, unless a radical turn is engineered.

◄$$$ SPAIN IS ANGRY, SAD, BEWILDERED,
FRUSTRATED, DISPIRITED, AND BROKE. A RECENT
NATIONWIDE DEMONSTRATION SHOWED SOLIDARITY,
BUT NO SOLUTIONS. SHOWN ARE MILLIONS IN SEVERAL
CITIES TAKING TO THE STREETS. SO FAR THEY
ARE ORDERLY. LATER THEY WILL NOT BE ORDERLY,
AS A DESTRUCTIVE PHASE WILL BE UNLEASHED,
LIKE IN GREECE. FRANCE AND ITALY WILL FOLLOW THE SPANISH LEAD IN THIS DANCE.
$$$